The global economic slowdown is having an adverse impact on many
businesses, often resulting in lower cash flows. Lower cash flows
increase the likelihood that asset carrying amounts may be
"impaired" in terms of AASB 136 "Impairment of
Assets" ("the Standard").
An asset or cash generating unit ("CGU") is impaired
when its carrying amount is greater than its "recoverable
amount". Recoverable amount is the higher of an asset's
fair value less cost to sell and its "value in use"
("VIU"), a discounted cash flow determination. An entity
must test goodwill and certain other intangible assets for
impairment annually.
ASIC has highlighted asset impairment as one of its focus areas
when it undertakes its review of 30 June 2009 financial
reports. Entities should ensure that impairment calculations are
robust and support its position in terms of the requirements of the
Standard. The following practical tips may assist in calculating
the recoverable amount of assets and CGUs:
