What is IAS 36: Impairment of Assets?
IAS 36 is the international accounting standard that prescribes how a company tests assets for impairment and recognizes write-downs when the carrying amount exceeds the recoverable amount.
How It Works
- Identify indicators of impairment (or test annually for goodwill).
- Compute recoverable amount = higher of fair value less costs to sell, and value in use.
- Write down to recoverable amount if lower than carrying value.
Saudi Context
SOCPA-licensed audit firms test IAS 36 closely on Saudi conglomerates with goodwill from M&A and on real-estate assets revalued under volatile cycles.
Example
A Saudi company carrying SAR 50 million of goodwill computes recoverable amount at SAR 35 million and books a SAR 15 million impairment charge.