Impairment tests
Monitoring the value of business assets is governed by IAS 36 which includes all asset impairment provisions not covered by a specific standard. Companies must, at the close of their fiscal year and / or when an indication of impairment is found, proceed to compare the recoverable value of their assets at their net book value.
The application of fair value is at the heart of debate for several years. Beyond the ongoing discussions, it is necessary to master the process and calculations to best assess the value of an asset.
Define the concept of fair value in IFRS

Fair value: scope and limits of its use IFRS

Definition of asset impairment
Measuring fair value: prioritizing methods

Analog methods and discounted cash flow

Amortized cost

Focus on IFRS 13, effective January 1, 2013: fair value concept and methodology for determining the fair value of assets, liabilities and equity instruments
Set the discount rate to be used for calculating the present value of future cash flows

The choice of discount rate

The interest rates used as basis for calculation: average weighted average cost of capital ...

Taking into account the specific risks

Taking account of cash flows and calculation methods
Present value of future cash flows: to capture the right information

Best Estimate

Expected value

Taking account of changes in estimates
Realizing the impairment test

Realizable value, net selling price, utility value

Definition and determination of cash generating units (CGU)

Utility value of future cash flows and key parameters: forecasts, growth rate, discount rate, residual value...
Exercise: calculate the value in use of future cash flows and asset impairment
Calculating the amortized cost of an asset or a financial liability

Identify relevant assets and liabilities

Mastering the effective interest method