What is Impairment of assets? | ARSEN Audit Glossary

Q: What is Impairment of assets?

Recognising as a loss the excess of an asset's carrying amount over its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs of disposal and its value in use. Goodwill and indefinite-lived intangible assets are tested every year, and other assets when there is an indication of impairment. Impairment tests are usually performed using a discounted cash flow model and are among the key matters in an audit.

The recoverable amount is the higher of the asset's fair value less costs of disposal and its value in use. Goodwill and indefinite-lived intangible assets are tested every year, and other assets when there is an indication of impairment.

Impairment tests are usually performed using a discounted cash flow model and are among the key matters in an audit.

Source: TAS 36

Related terms

GoodwillThe excess of the consideration paid in a business combination over the fair value of the acquired business's identifiable net assets.Discounted cash flow (DCF)A valuation method based on discounting the free cash flows an asset or company will generate in the future to the present using an appropriate discount rate.Intangible assetsIdentifiable non-monetary assets without physical substance; software, licences, brands and patents are examples.Accounting policiesThe specific principles, bases, conventions, rules and practices an entity applies in preparing its financial statements.Amortised costThe amount at which a financial asset or liability is measured at initial recognition, minus principal repayments, plus cumulative amortisation calculated using the effective interest method.AssociateAn entity over which the investor has significant influence but not control or joint control.

Last updated: October 22, 2026 · This definition is for general information only.