Hi,

I am trying to understand how and when you can reverse an impairment. An asset (subsidiary) was recorded at cost in the accounts. The valuation last year using the subsidiary’s net asset value dropped and an entry for impairment was recorded. This year using the same technique for impairment, the value has risen but not to the original cost. Can I reverse part of the impairment (put to income) to reflect a true and fair value? Does IAS 36 allow this, as I was under the impression you could only reverse impairment if the estimate method changed or there was a significant reason.

Please help as I am getting confused…...

Thanks

I am assuming that this is simply for a single asset and not goodwill.

If there are indications that previously recognised impairments have decreased then you should recalculate recoverable amount.  If you have changed the estimates used to determine recoverable amoount since the last time an impairment loss was recognised and these changes then results in recoverable amount increasing then that increase represents a reversal of some of the impairment loss.  You have to be careful because under IAS 36 you cannot increase the carrying amount of the asset subject to the impairment reversal to anymore than would be recognised under depreciated/amortised historic cost had no impairment been recognised in previous years.

If you are to reverse prior year’s impairments, then you recognise it in your profit and loss account immediately.

Kind regards

Steve