Impairment Considerations For Financial Assets

While we are hopeful that the global economy might soon be emerging from the turmoil created by the credit crisis and the somewhat disastrous effects it has had on asset values around the world.

The issue of impairment remains one that demands careful consideration for financial assets held by many entities. Higher interest rates, lower equityprices and illiquid markets for certain investment holdings are likely to be triggers that require holders to conduct impairment testing to ascertain whether write downs are necessary.

Requirements for impairment testing

An entity must assess at each reporting date whether there exists objective evidence of impairment as a result of events that may have impacted the estimated future cash flows expected to be generated. Where such evidence exists, a formal impairment test must be conducted.