Impairment – a commercial perspective
Abstract
Purpose
This paper aims to identify conceptual changes in the practical application of asset impairment testing methods as required under IAS (International Accounting Standards) 36.
Design/methodology/approach
The paper explores general principles for an impairment testing framework, to address impairment issues that arise in valuation practice.
Findings
This paper shows that the way value in use is required to be assessed is technically flawed, prone to application error, and creates conceptual and financial mismatches with the requirements of other accounting standards.
Practical implications
From a practical perspective, the consequential scope for valuation errors is further exacerbated by the reluctance of company directors to accept the need for impairment and, in some cases, by gaming.
Originality/value
This paper provides a practitioner's viewpoint to impairment testing under the IAS, and identifies several inconsistencies with the application of the standard.
Keywords
Citation
Lonergan, W. (2010), "Impairment – a commercial perspective", Managerial Finance, Vol. 36 No. 9, pp. 812-826. https://doi.org/10.1108/03074351011064672
Publisher
:Emerald Group Publishing Limited
Copyright © 2010, Emerald Group Publishing Limited