This paper aims to identify conceptual changes in the practical application of asset impairment testing methods as required under IAS (International Accounting Standards) 36.
The paper explores general principles for an impairment testing framework, to address impairment issues that arise in valuation practice.
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.
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.
This paper provides a practitioner's viewpoint to impairment testing under the IAS, and identifies several inconsistencies with the application of the standard.
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