Impairment of fixed assets
Theory:
- If at least one impairment indicator occurs, a detailed impairment test is required
- Internal indicators - examples: loss of use, damage, lower performance, restructuring
- External indicators - examples: technological changes, reduced market prices, market changes
- The impairment test will help to calculate the impairment provision to fixed assets (IAS 36, par. 9- 15).
Practice - examples of errors:
- no analysis is performed of impairment indicators to fixed assets
- errors in calculation of value in use of the tested assets resulting from insufficient knowledge on discounting of cash flows and correct estimation of free cash flows and discount rates
- the incorrect value in use generates errors in impairment provisions to fixed assets
