How to Answer Impairment Questions in ACCA SBR
Impairment questions under IAS 36 test the recoverable-amount comparison and the allocation of losses. Here's the structure that captures the marks in SBR.
Impairment questions in ACCA SBR test IAS 36: whether an asset or cash-generating unit is carried above its recoverable amount, and how any loss is measured and allocated. The examiner wants the principle applied to the scenario, not a recital of the standard.
The core test
An asset is impaired when its carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value in use. Value in use is the present value of the future cash flows the asset is expected to generate.
A reliable method
- Look for indicators of impairment in the scenario — a fall in demand, damage, a downturn, obsolescence.
- Calculate the recoverable amount as the higher of FVLCD and value in use.
- Compare it with the carrying amount; the excess is the impairment loss.
- For a CGU, allocate the loss first to any goodwill, then pro-rata across the other assets, without taking any asset below its own recoverable amount.
Watch the traps
- Goodwill impairment is never reversed.
- Discount rates and cash-flow assumptions in value-in-use invite professional scepticism — challenge management's optimism.
The application marks are won by tying each step to the scenario. Marking a full impairment answer against the official ACCA scheme with The 50% Club shows you exactly which calculation and explanation marks you earned.