Introduction-to-Accounting-Standard-136.pptx

In this Presentation, discussed overview of Accounting Standard-136.
1. Purpose & Scope
2. Impairment of Assets
3. Cash-Generating Units
4. Recoverable Amount
5. Impairment Loss Recognition
6. Reversal of Impairment Loss
7. Disclosure Requirement

1. Introduction to Accounting Standard 136 Accounting Standard 136 provides guidance on assessing and recognizing the impairment of assets, ensuring that companies accurately report the true value of their assets on financial statements. Dr DEEPAN A

2. Purpose and Scope 1 Asset Valuation The standard helps organizations determine if an asset's carrying value exceeds its recoverable amount, indicating impairment. 2 Consistent Reporting It establishes a framework for recognizing and measuring impairment losses, promoting comparability across financial statements. 3 Scope The standard applies to a wide range of assets, including property, plant, equipment, intangibles, and investments.

3. Impairment of Assets Definition Asset impairment occurs when an asset's carrying value exceeds its recoverable amount, leading to a permanent decline in value. Triggers Factors like technological obsolescence, physical damage, or market changes can indicate potential asset impairment. Implications Recognizing impairment is crucial, as it impacts a company's financial position and performance.

4. Cash-Generating Units Identification Assets are grouped into cash-generating units (CGUs), the smallest identifiable group that generates cash inflows. Allocation Goodwill and corporate assets are allocated to CGUs to enable impairment testing at the appropriate level. Interdependence CGUs reflect the level at which an organization manages its assets and monitors its operations.

5. Recoverable Amount Definition The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Fair Value Fair value is the price that would be received to sell an asset in an orderly transaction. Value in Use Value in use is the present value of the future cash flows expected to be derived from the asset. Comparison The recoverable amount is the higher of these two values, representing the asset's true economic worth.

6. Impairment Loss Recognition Identification Assess if an asset's carrying amount exceeds its recoverable amount, indicating potential impairment. Measurement Determine the impairment loss as the difference between the asset's carrying amount and recoverable amount. Recognition Record the impairment loss in the income statement, reducing the asset's carrying value. Timing Impairment losses are recognized when the condition occurs, not deferred or averaged over time.

7. Reversal of Impairment Loss 1 Trigger A change in the estimates used to determine the asset's recoverable amount may indicate a reversal. 2 Limit The reversal cannot exceed the carrying amount that would have been determined had no impairment loss been recognized. 3 Accounting Reversals are recognized in the income statement, increasing the asset's carrying value.

8. Disclosure Requirements Impairment Losses Amounts recognized for each class of asset, and the events and circumstances leading to the recognition. Reversals Amounts recognized for each class of asset, and the events and circumstances leading to the reversal. Assumptions Key assumptions used in determining the recoverable amount of assets. Uncertainties Significant uncertainties that could impact the recoverable amount estimates.