Ind As 36 / IFRS IAS -36 – Impairment of Assets:

The objective is to verify that the assets of an entity are not recorded on the financial statements at a value exceeding their recoverable amount. This amount is determined as the higher value between the fair value less costs of disposal and the value in use. Except goodwill and specific intangible assets, which necessitate an annual impairment assessment, entities must perform impairment tests whenever there are signs indicating a potential impairment of an asset. Additionally, the assessment may extend to a 'cash-generating unit' if an asset does not generate cash flows that are substantially distinct from those of other assets.


Impairment testing is conducted as part of the financial reporting process, typically within the context of assessing the carrying value of assets on the balance sheet. This evaluation ensures that assets are not stated at a value exceeding their recoverable amount. Impairment testing is particularly crucial for assets such as property, plant, and equipment, intangible assets, and goodwill. It is a standard practice to perform impairment testing when indicators are suggesting a potential decline in the value of an asset. Additionally, impairment testing is carried out periodically, usually annually, or more frequently if there are significant changes in circumstances that might affect the recoverable amount of assets.

Impairment testing is typically conducted for various assets on a company's balance sheet to ensure their carrying value does not exceed their recoverable amount. Here's a list of common items where impairment testing is done:

This list may vary depending on the specific nature of a company’s operations and the accounting standards applicable in their jurisdiction. Additionally, certain industries may have unique assets or items that require impairment testing.