IFRIC 10
Published
Interim Financial Reporting and Impairment
Addresses the interaction between IAS 34 and the impairment requirements of IAS 36 for goodwill, and historically for investments in equity instruments and financial assets carried at cost.
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Conceptual Framework Linkage
A collision between two defensible principles
IAS 34 treats each interim period as an integral part of the annual period, generally favouring the SAME recognition and measurement principles used at year end. But IAS 36 permanently prohibits reversing a goodwill impairment loss once recognised. IFRIC 10 exists because, without guidance, an entity could argue an interim impairment "washes out" by year end if conditions recover – a result IAS 36's own annual-period logic was designed to prevent.
Consistency between interim and annual periods
IFRIC 10's conclusion ensures an impairment loss recognised in ANY interim period within a financial year is treated exactly as it would be if that same loss had been recognised at the year end – consistent, comparable, and immune to which specific quarter the underlying trigger happened to be identified in.
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Scope & Definitions
What IFRIC 10 covers
IFRIC 10 addresses the interaction between IAS 34 and the impairment requirements of IAS 36 for goodwill, and (historically) IAS 39 for investments in equity instruments and financial assets carried at cost. It applies to any entity that reports both interim AND annual financial statements applying IFRS.
ASSETS IN SCOPE OF THE NO-REVERSAL RULE
Goodwill Investments in equity instruments Financial assets carried at cost because their fair value cannot be reliably measured
Key definitions
Interim period
A financial reporting period shorter than a full financial year, per IAS 34 – typically a quarter or half-year.
Impairment loss
The amount by which the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, per IAS 36.
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The Core Question
What IFRIC 10 actually decides
If an entity recognises an impairment loss on goodwill or a relevant equity or cost-measured financial asset in an interim period, and the underlying indicators that triggered the loss REVERSE by the next reporting date, may the entity reverse the previously recognised impairment loss? IFRIC 10's answer is a firm NO.
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The No-Reversal Rule for Goodwill
Interim impairment losses on goodwill are permanent
An entity shall NOT reverse an impairment loss recognised in a previous interim period in respect of goodwill, even if no loss, or a smaller loss, would have been recognised had the impairment assessment been performed only at the end of a subsequent reporting period. This directly extends IAS 36's absolute prohibition on reversing goodwill impairment into the interim-reporting context.
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The No-Reversal Rule for Equity Instruments
Historically extended to certain financial assets too
The same no-reversal logic historically applied to impairment losses on investments in equity instruments, and on financial assets carried at cost because fair value could not be reliably measured, under the former IAS 39 impairment model – such losses, once recognised through profit or loss in an interim period, could not be reversed even if the equity instrument's value later recovered.
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Worked Example – Quarterly Impairment
Goodwill impairment recognised in Q2, recovering by Q4
Example: No reversal permitted despite recovery
A cash-generating unit carries goodwill of $3,000,000. At the end of Q2, a recoverable amount assessment identifies an impairment loss of $500,000, which is recognised in the Q2 interim financial statements, reducing goodwill to $2,500,000. By Q4, the same cash-generating unit's recoverable amount has recovered such that no impairment would have been indicated had the assessment first been performed at that date.
The $500,000 impairment loss recognised in Q2 CANNOT be reversed in Q4 or at year end. Goodwill remains carried at $2,500,000 in the annual financial statements, notwithstanding the year-end recoverable amount assessment showing no impairment on a stand-alone basis.
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What IFRS 9 Changed in Practice
The equity-instrument leg is now largely academic
Under IFRS 9, equity instruments are generally measured at fair value, with changes recognised either in profit or loss, or – if an irrevocable FVOCI election is made – in other comprehensive income, with NO subsequent recycling to profit or loss even on disposal. Since IFRS 9 does not use an impairment model for equity instruments in the way IAS 39 did, IFRIC 10's equity-instrument guidance has little remaining practical application; its GOODWILL guidance, however, remains fully operative and is the interpretation's primary ongoing relevance today.
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Assets Where Reversal IS Permitted
A narrow, specific prohibition – not a blanket rule
IFRIC 10's no-reversal conclusion is specific to goodwill (always) and to the historical IAS 39 equity or cost-measured asset categories. It does NOT prevent reversal of impairment losses on OTHER assets within IAS 36's scope – such as property, plant and equipment or intangible assets other than goodwill – which remain eligible for impairment reversal in a LATER period if the recoverable amount genuinely recovers.
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Disclosure
What IFRIC 10 layers onto IAS 34/IAS 36
Nature and amount of any impairment loss recognised or reversed during an interim period Explanation where an interim impairment loss on goodwill has not been reversed despite an apparent later recovery in indicators
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether impairment indicators genuinely exist at an interim date
SIGNIFICANT ESTIMATES
Recoverable amount of the cash-generating unit at the interim date
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IFRIC 10 vs US GAAP
Comparison – IFRIC 10 vs US GAAP (ASC 270 / ASC 350)
FeatureIFRS (IFRIC 10)US GAAP
Reversal of goodwill impairment generallyAlways prohibited, at both interim and annual levelAlso always prohibited under ASC 350
Explicit interim-specific interpretationYes – IFRIC 10 directly addresses the interim or annual interactionASC 270 embeds a similar "integral part of the annual period" philosophy
On goodwill specifically, the two frameworks reach a highly converged outcome; IFRIC 10's distinct contribution is making explicit that the SAME absolute rule applies even to a loss recognised only in an interim period.
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Statement Mapping
Where every IFRIC 10 event lands
EventStatement(s) affectedNotes
Interim impairment loss on goodwillSOFP SOPLRecognised in the interim period; carried forward permanently
Apparent recovery of recoverable amount by year endNo entryNo reversal recognised – the prior loss stands
Impairment loss on non-goodwill PPE or intangibles reversing laterSOFP SOPLReversal permitted under general IAS 36 rules
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Related Standards
Cross-reference map
StandardConnection
IAS 34Supplies the interim-reporting framework and the general principle that interim periods follow annual recognition and measurement principles
IAS 36Supplies the absolute no-reversal rule for goodwill that IFRIC 10 extends explicitly to interim periods
IFRS 9Superseded IAS 39's equity-instrument impairment model
IFRS 3Governs the initial recognition of goodwill that IFRIC 10's no-reversal principle protects from write-back
Quick-reference glossary
Cash-generating unit (CGU)
The smallest identifiable group of assets that generates cash inflows largely independent of other assets, the level at which goodwill impairment is tested under IAS 36.
Recoverable amount
The higher of an asset's (or CGU's) fair value less costs of disposal and its value in use – compared against carrying amount to determine impairment under IAS 36.
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Glossary
Cash-generating unit (CGU)
The smallest identifiable group of assets that generates cash inflows largely independent of other assets, the level at which goodwill impairment is tested under IAS 36.
Recoverable amount
The higher of an asset's (or CGU's) fair value less costs of disposal and its value in use.
No-reversal principle
The IAS 36 rule, extended by IFRIC 10 to interim periods, that once a goodwill impairment loss is recognised it can never be written back.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows
History & Development
Jul-2006
In July 2006 the International Accounting Standards Board issued IFRIC 10 Interim Financial Reporting and Impairment. It was developed by the Interpretations Committee.
Nov-2013
IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) and IFRS 9 Financial Instruments
Minor consequential amendment to IFRIC 10