Impairment Test (IFRS) - Value in Use

Hi guys,

To test an asset for Impairment under IFRS, we need to compare the Carrying value with the greatest of (FV - Selling Cost) and the Value in Use.

Question: Is Value in use always given or is there any trick to find it out ?


Good question. I was just watching the Elan Intensive Review and Olinto was used the Discounted Future Cash Flows of the asset as ‘Value in Use.’ That’s what I’m going with. The practice question gave Discounted and Undiscounted future cash flows, and you used the Undiscounted for US GAAP and Discounted/PV for IFRS.

remember the undiscounted CF is to determine if the asset is impaired, not its FMV

This is only true for US GAAP, where the process of dertermining impairment goes through 2 step. First is to determine whether the asset is impaired or not (carrying value > undiscounted future cash flow), and second is to determine the impairment amount (the difference of carrying value and discounted future cash flow). It is a bit tricky

For IFRS, the asset is impair when its carrying value is more than the greater of (fair value -selling cost or discounted future cash flow)

Yip agree, only use the undiscounted in US GAAP.

Value in use - back from when I did it at Uni and re-iterated by Peter Olinto is the PV of future cash flows to the asset.