Tier-3 scope
For typical SME clients, impairment is indicator-driven and assessed annually as part of close. The full IAS 36 machinery (annual mandatory test of goodwill, cash-generating unit determination, value-in-use cash-flow projections with discount rates) becomes load-bearing for asset-intensive or M&A-active clients. Build the indicator-based assessment first; build full machinery when required.
Required first reads
doctrine/accounting-finance-doctrine.mddoctrine/references/ifrs-for-smes-default.md(Section 27)doctrine/references/full-ifrs-overlay.md(IAS 36)doctrine/references/chart-of-accounts.md
Indicators
External:
- Significant decline in market value beyond normal use.
- Significant adverse changes in technology, market, economy, legal environment.
- Increase in market interest rates affecting discount rates.
- Carrying amount > market capitalisation (listed entities).
Internal:
- Obsolescence or physical damage.
- Plans to discontinue, restructure, or dispose of an asset.
- Worse-than-expected economic performance.
Recoverable amount
= higher of:
- Fair value less costs of disposal.
- Value in use (PV of future cash flows from the asset / CGU).
Carrying amount > recoverable amount → impairment loss
Recognised in P&L (or against revaluation surplus where applicable).
Reversal
Section 27 / IAS 36 allow reversal of prior impairment (other than goodwill) up to the original carrying amount less subsequent depreciation, if indicators reverse.
Goodwill impairment is not reversed under either framework.
Goodwill specifics
- Section 19 (IFRS for SMEs): goodwill amortised over useful life (max 10 years if useful life cannot be reliably estimated). Impairment tested on indicators.
- IFRS 3 (full IFRS): goodwill not amortised; tested for impairment annually.
Build implications
- Indicator-assessment checklist run at each reporting date.
- Where indicator triggers, the system supports a workpaper for recoverable-amount calculation.
- Impairment journal posted via the posting service.
- Reversal journal where conditions met; goodwill impairments locked from reversal.
- Disclosure note generator.
CoA implications
| Code | Name |
|---|---|
| 1799 Accumulated Impairment — PPE | Non-current contra. |
| 1899 Accumulated Impairment — Intangibles | Non-current contra. |
| 6750 Impairment Loss — PPE | P&L. |
| 6760 Impairment Loss — Intangibles / Goodwill | P&L. |
| 6770 Reversal of Impairment Loss | P&L (gain). |
Forbidden patterns
- Reversal of goodwill impairment (blocker).
- Carrying amount > recoverable amount left unrecognised when indicator confirmed (blocker).
- Annual goodwill impairment test claimed under IFRS for SMEs (mis-application of frameworks).
- Discount rate hardcoded (use entity / asset-specific rate).
Files
SKILL.md.references/indicator-checklist.md.references/value-in-use-workpaper-template.md(build when first needed).
Last reviewed: 2026-05-12. Next review due: 2026-11-12.