Recoverable amount models, CGU allocation and paragraph 134(f) sensitivity disclosure your auditor can follow line by line.
IAS 36 impairment testing services establish whether an asset or cash-generating unit is carried above its recoverable amount, and produce the evidence file supporting that conclusion. Recoverable amount is the higher of fair value less costs of disposal and value in use. The deliverable is a memo, a model and a disclosure an auditor can test.
And that challenge lands late. Usually a fortnight before sign-off, when there is no time to rebuild a model. For the mechanics of the test itself, see IAS 36 impairment testing explained.
The impairment test itself is under active review. In March 2024 the IASB published an Exposure Draft proposing amendments to IFRS 3 and IAS 36, aimed at improving business combination disclosures and simplifying the impairment test while keeping the impairment-only model for goodwill.
Redeliberations are still running. At its May 2026 meeting a narrow majority of the Board, seven members of thirteen, tentatively concluded the benefits of the package would justify the costs, and a decision on project direction is expected in the second half of 2026. No final amendments have been issued.
So nothing has changed yet, and the standards taking effect in 2026 leave IAS 36 as it stands. But the disclosure expectations already in force are being applied more strictly, and the sensitivity requirement is where that shows up first.
| Asset | Test frequency | Indicator needed |
|---|---|---|
| Goodwill acquired in a business combination | Annually, and whenever an indicator exists | No |
| Intangible assets with indefinite useful lives | Annually, and whenever an indicator exists | No |
| Intangible assets not yet available for use | Annually, and whenever an indicator exists | No |
| All other assets in scope | Only when an indicator exists | Yes |
| External indicators | Internal indicators |
|---|---|
| Market value has declined more than expected from normal use or the passage of time | Physical damage or obsolescence has been identified |
| Adverse changes in technology, markets, the economy or the legal environment | The asset is idle, part of a restructuring, or held for disposal |
| Market interest rates have risen, affecting the discount rate | Economic performance is worse than budgeted or forecast |
| Carrying amount of net assets exceeds market capitalisation | Plans to dispose of an asset earlier than expected |
What teams need: a CGU boundary that reflects how cash actually flows through the business.
How Prima solves it: we map cash inflows to the lowest level that is largely independent, and document why each boundary sits where it does.
What teams need: to know how close the unit is to impairment before the auditor tells them.
How Prima solves it: we quantify headroom in absolute terms and model what closes the gap.
What teams need: a pre-tax rate built from components a reviewer can rebuild.
How Prima solves it: a documented rate build-up with sourced inputs and the pre-tax conversion shown.
What teams need: a paragraph 134(f) disclosure that satisfies the requirement rather than gesturing at it.
How Prima solves it: where a reasonably possible change in a key assumption would take the carrying amount above recoverable amount, we quantify the headroom, name the assumption driving most risk, and state the change required.
This is the disclosure most often reduced to a single boilerplate sentence. A statement that a reasonably possible change could result in impairment, with no numbers, does not meet the requirement.
What teams need: a record of the assessment, not just its outcome.
How Prima solves it: an indicator assessment log covering each external and internal indicator, with the conclusion and its basis.
What teams need: a model someone else can pick up and run next year.
How Prima solves it: we rebuild the value in use model with documented inputs, visible logic and a handover pack.
Two tracks. Track A builds the test. Track B reviews a test you have already run.
| Service | What it means for your reporting |
|---|---|
| Recoverable amount modelling | Value in use and fair value less costs of disposal both calculated where relevant, so the higher figure is supported rather than assumed. |
| CGU identification and goodwill allocation | Units drawn at the lowest largely independent level, with goodwill allocated and the reasoning recorded for the auditor. |
| Discount rate build-up | A pre-tax rate assembled from sourced components, with the derivation visible so next year's preparer can rebuild it. |
| Cash flow projections | Budgets tested for reasonableness, with the extrapolation beyond the budget period and its growth rate documented. |
| Disclosure drafting including 134(f) | A sensitivity analysis that quantifies headroom and names the assumption carrying most risk, drafted ready for the accounts. |
| Indicator assessment framework | A repeatable log covering every external and internal indicator, so a no-impairment conclusion is evidenced not asserted. |
| Service | What it means for your reporting |
|---|---|
| Impairment file review | An independent read of the model, memo and disclosure against IAS 36 before your auditor sees it. |
| Audit response support | Technical responses to auditor challenges on CGU boundaries, discount rates and disclosure adequacy, prepared with you. |
| Impairment due diligence | Pre-transaction review of a target's impairment position, so a problem is priced rather than inherited. |
| Expert witness and dispute support | Independent technical opinion in impairment-related disputes, grounded in the standard rather than the outcome. |
| Impairment training | Practical sessions for finance teams on indicators, CGUs and disclosure, so the second cycle runs without external help. |
Expert witness work and training are unusual in this market. Most impairment providers stop at the valuation.
Five stages. At each one you know what has been completed and what comes next.
| Step 1: Scope |
We confirm which assets are in scope, which require annual testing, and where indicators exist. | OUTPUT: Scoping memo and indicator assessment log. |
| >>> | ||
| Step 2: Structure |
We identify cash-generating units and allocate goodwill across them. | OUTPUT: CGU map with the independence reasoning documented. |
| >>> | ||
| Step 3: Model |
We build the value in use model and the discount rate from sourced components. | OUTPUT: Working model, rate build-up and assumption register. |
| >>> | ||
| Step 4: Test |
We compare carrying amount to recoverable amount and quantify headroom per unit. | OUTPUT: Impairment memo with results and sensitivity table. |
| >>> | ||
| Step 5: Disclose |
We draft the note, including the paragraph 134(f) sensitivity disclosure. | OUTPUT: Disclosure draft and an audit response file. |
Goodwill from branch or portfolio acquisitions, alongside separate IFRS 9 credit impairment on the loan book.
Investments across multiple units, where corporate assets have to be allocated or tested top-down.
Long-lived assets sensitive to commodity assumptions and discount rate movements
Goodwill and distribution intangibles, reported alongside IFRS 17 measurement.
Project-level units, contract assets outside scope, and market value declines as the dominant external indicator.
Licences and capitalised development, including intangibles not yet available for use.
Store-level CGUs, brand intangibles with indefinite lives, and annual testing regardless of performance.
Plant-level CGUs where a single line can be largely independent, and idle capacity is a live indicator.
An impairment test that fails audit review does not stay inside finance. It becomes an adjustment posted late, a delayed sign-off, and in the worst case a prior period restatement that the market reads as a control weakness rather than a technical error.
The disclosure carries its own exposure. Where headroom is thin and the paragraph 134(f) note discloses nothing, the gap between what management knows and what the accounts say is visible to anyone comparing the note to the numbers.
And the cost compounds quietly. A CGU boundary set carelessly in year one has to be either defended or changed every year afterwards, and changing it invites the question of why it was wrong before.
Impairment testing is not an annual formality. It is the record showing that the assets on your balance sheet are worth what you say they are.
Five working days gives you a written view of where your current file would be challenged and what it would take to close each gap. Send the model and the prior year note.
IAS 36 ensures that assets are not overvalued on your financial statements. It requires businesses to assess the recoverable amount of their assets. This is the higher of the asset's fair value less costs to sell or its value in use. If the carrying amount of an asset exceeds its recoverable amount, an impairment loss must be recognized.
IAS 36 requires that an asset is not carried above its recoverable amount, which is the higher of fair value less costs of disposal and value in use. Goodwill, indefinite-life intangibles and intangibles not yet available for use are tested annually regardless of indicators. All other assets in scope are tested only when an indicator of impairment exists.
Fees track the number of cash-generating units, whether goodwill is involved, and whether a model exists or must be built. A file review costs materially less than a build.
A file review runs about five working days. A full build typically runs four to six weeks depending on CGU count and data availability.
IAS 36 applies to all assets except those covered by other standards. Excluded are inventories, deferred tax assets, assets arising from employee benefits, financial assets within the scope of IFRS 9, investment property measured at fair value, biological assets within IAS 41, some assets arising from insurance contracts, and non-current assets held for sale.
Value in use is the present value of future cash flows expected from continuing use of the asset and its eventual disposal, discounted at a rate reflecting current market assessments. Fair value less costs of disposal is what a market participant would pay, net of disposal costs. Recoverable amount is the higher of the two, so only one needs to exceed carrying amount.
Under paragraph 134(f), where a reasonably possible change in a key assumption would cause the carrying amount of a cash-generating unit to exceed its recoverable amount, you must disclose the headroom, the value assigned to the key assumption, and the amount by which that assumption would need to change to eliminate the headroom. A general statement that impairment could arise does not satisfy the requirement.
Annually, and additionally whenever an indicator of impairment exists. The annual test applies regardless of performance, so a profitable unit still requires testing. The test can be performed at any point in the year provided it is performed at the same time each year.
No. Goodwill does not generate cash flows independently, so it is allocated to the cash-generating units expected to benefit from the business combination and tested as part of those units. This is why the CGU boundary is usually the most contested part of a goodwill impairment file.
Impairment losses on assets other than goodwill can be reversed where the estimates used to determine recoverable amount have changed, limited to the carrying amount that would have applied had no impairment been recognised. Impairment losses on goodwill can never be reversed.
External indicators include a market value decline beyond normal expectation, adverse changes in technology, markets, the economy or the law, rising market interest rates, and net assets exceeding market capitalisation. Internal indicators include physical damage or obsolescence, an asset becoming idle or held for disposal, and economic performance below budget. The list is not exhaustive.
Yes, in practice. The standard requires an assessment at each reporting date, and an assessment without a written conclusion cannot be evidenced to an auditor. We provide an indicator log covering each external and internal indicator with the conclusion and its basis.
Possibly. The IASB issued an Exposure Draft in March 2024 proposing amendments to IFRS 3 and IAS 36 that would improve business combination disclosures and simplify the impairment test, keeping the impairment-only model for goodwill. Redeliberations are ongoing and a decision on project direction is expected in the second half of 2026. No final amendments have been issued.
Yes. Our file review reads the model, memo and draft disclosure against IAS 36 and flags what an auditor is likely to challenge. This is the most common first engagement for teams who have a model but no confidence in defending it.
IAS 36 requires you to disclose information about how you estimated the recoverable amount for assets like goodwill or intangible assets with indefinite useful lives. This is especially important when you've allocated these assets to a cash-generating unit (CGU) for impairment review.
Fair value less costs to sell is the price a knowledgeable and willing buyer would pay for an asset, minus the costs of selling it. Value in use is the estimated future cash flows an asset will generate, discounted to present value using an appropriate discount rate.
IAS 36 applies to all assets except for:
While IAS 36 doesn't explicitly mention inventories, it's generally understood that it doesn't apply to them. Other standards, like IAS 2 Inventories, cover the measurement and recognition of inventories.
Value in use is the estimated future cash flows an asset will generate. It considers the cash inflows and outflows from using the asset and eventually selling it. These cash flows are discounted to account for the time value of money and risk.
When an impairment loss occurs, IAS 36 requires you to allocate it:
Corporate assets are assets that contribute to the future cash flows of more than one cash-generating unit. Examples include headquarters buildings, research centers, or electronic data processing (EDP) equipment.
IAS 36 aims to ensure that assets are not carried at a value higher than their recoverable amount. This helps prevent overstated asset values on your financial statements.
IAS 36 applies to all assets except those covered by other IFRS standards. This means it doesn't apply to inventories, which are covered by IAS 2.
Impairment sits inside a wider IFRS practice. These are the adjacent teams and pages at Prima:
Goodwill on the balance sheet means an annual test whether the business is performing or not. Where headroom is thin, the disclosure becomes the part everyone reads.
Prima's IAS 36 impairment testing services start with a five-day file review that tells you where your current position would be challenged and what closing each gap requires. You get a written answer before committing to anything.
Request Your Free Impairment File Review30-minute call. No obligation. Specific to your CGUs and year end.
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