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Section 27: Impairment of Assets
Section 27 provides detailed guidance on the indicators of impairment, how impairment reviews should be performed and the circumstances in which they should be reversed. It also provides the detailed disclosure requirements where an impairment review has been performed.
Objective and scope
Extract from FRS102: Section 27.1 – 27.1A
27.1 An impairment loss occurs when the carrying amount of an asset exceeds its recoverable amount. This section shall be applied in accounting for the impairment of all assets other than the following, for which other sections of this FRS establish impairment requirements:
(a) assets arising from construction contracts (see Section 23 Revenue);
(b) deferred tax assets (see Section 29 Income Tax);
(c) assets arising from employee benefits (see Section 28 Employee Benefits);
(d) financial assets within the scope of Section 11 Basic Financial Instruments or Section 12 Other Financial Instruments Issues;
(e) investment property measured at fair value (see Section 16 Investment Property); and
(f) biological assets related to agricultural activity measured at fair value less estimated costs to sell (see Section 34 Specialised Activities).
27.1A This section shall not apply in accounting for the impairment of deferred acquisition costs and intangible assets arising from contracts within the scope of FRS 102 Insurance Contracts.
OmniPro comment
Section 27 requires that no asset within its remit should be stated at an amount above its recoverable amount. The items above are excluded as these have specific rules under their own standard. In summary a list of the main assets coming within the remit of Section 27:
- Property, plant and equipment
- Goodwill
- Intangible assets
- Investments in associates, joint ventures, subsidiaries
- Investment property classified within property, plant and equipment due to it not being able to be reliably measured without any undue cost or effort
- Inventory not carried at fair value
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