Asset Impairment Testing Calculator
Run an IAS 36 impairment test: compare an asset's carrying amount with its recoverable amount — the higher of fair value less costs of disposal and value in use (discounted cash flows).
Frequently Asked Questions
What is asset impairment?
An asset is impaired when its carrying amount (book value) exceeds its recoverable amount — the cash the business can realistically recover through use or sale. Under IAS 36, the recoverable amount is the higher of (1) fair value less costs of disposal and (2) value in use, which is the present value of the future cash flows the asset will generate. The excess must be written off as an impairment loss in profit or loss.
How do you calculate value in use?
Value in use is the present value of the future cash flows expected from the asset: project cash flows over its remaining useful life (based on reasonable, supportable budgets — normally max 5 years plus a steady growth extrapolation), then discount them at a pre-tax rate reflecting current market assessments of the time value of money and asset-specific risk. This calculator lets you enter value in use directly or estimate it from an annual cash flow, growth rate, useful life, and discount rate.
When must a company test assets for impairment?
IAS 36 requires testing whenever there is an indication of impairment — external signs (market value decline, adverse market/legal changes, rising interest rates) or internal signs (obsolescence, physical damage, underperformance, restructuring plans). Goodwill, indefinite-life intangibles, and intangibles not yet in use must additionally be tested at least annually regardless of indicators.
Can an impairment loss be reversed?
Under IFRS (IAS 36), impairment losses on most assets are reversed if the recoverable amount recovers — but only up to the carrying amount that would have existed had no impairment been recognised. Impairment of goodwill can never be reversed. Under US GAAP (ASC 360/350), impairment reversals are prohibited for assets held for use, which is a key IFRS–GAAP difference.