impairmentchecks

Impairmentchecks refers to procedures or a software component used to determine whether an asset's carrying amount exceeds its recoverable amount, indicating impairment. It is intended to support accounting and financial reporting by identifying when a write-down to recoverable value is required under applicable standards such as IFRS (IAS 36) or US GAAP (various provisions for goodwill, long-lived assets, and intangible assets).

The concept applies to a range of asset types, including goodwill, intangible assets, property, plant and equipment, and long-lived financial assets. Impairment checks can be performed at regular intervals, such as an annual goodwill test, or in response to indicators of impairment, such as adverse market conditions, obsolescence, or physical damage. The core trigger is when the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, which is defined as the higher of fair value less costs of disposal and value in use.

The typical process involves identifying the relevant cash-generating unit or asset group, estimating future cash flows, selecting appropriate discount rates, and calculating the recoverable amount. If the recoverable amount is less than carrying amount, an impairment loss is recognized for the amount of the difference. Allocation rules generally require applying impairment first to any goodwill within the unit, then to other assets in a defined order. Reversal of impairment is restricted or prohibited for many asset classes under various standards, though some jurisdictions allow reversal for certain assets under specific conditions.

Implementation considerations include data quality, auditability, and governance. Outputs from impairment checks usually comprise the impairment loss, updated carrying amounts, and required disclosures. When integrated with enterprise resources planning and financial reporting systems, impairmentchecks support consistent, auditable impairment testing and disclosure practices.