Ind AS 36
Active
Impairment of Assets
Prescribes the procedures for identifying and measuring impairment of assets, including recoverable amount, cash-generating units and goodwill impairment testing, converged almost exactly with IAS 36.
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Conceptual Framework Linkage
Identical recoverable amount philosophy to IAS 36
Ind AS 36 applies the IDENTICAL principle as IAS 36 – an asset's carrying amount should NOT exceed its RECOVERABLE AMOUNT (the higher of fair value less costs of disposal and value in use), with any excess recognised as an IMPAIRMENT LOSS.
HOW IND AS 36 MAPS TO THE FRAMEWORK
Prudence – ensuring assets are not carried at more than can genuinely be recovered – identical to IAS 36 Discount rate practice – for value-in-use calculations, Indian practice commonly BUILDS UP discount rates starting from Indian GOVERNMENT SECURITY (G-Sec) yields, given the ABSENCE of a deep, liquid high-quality corporate bond market – a practical application consideration, IDENTICAL in principle to IAS 36's own market-based discount rate requirement, but with a distinctly Indian starting benchmark
Ind AS 36 introduced NO substantive change to the impairment framework relative to IAS 36 – its Indian relevance is most pronounced for discount rate BENCHMARK selection and CGU determination across LARGE, diversified conglomerate structures.
The core recoverable amount formula – identical to IAS 36
Recoverable amount = HIGHER of (Fair value less costs of disposal, Value in use)
IDENTICAL formula to IAS 36 – impairment loss = carrying amount − recoverable amount, when carrying amount exceeds recoverable amount.
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Scope & Applicability
What Ind AS 36 covers
Ind AS 36 applies to most non-financial assets, EXCLUDING inventories, contract assets (Ind AS 115), deferred tax assets, and financial assets within Ind AS 109's scope – IDENTICAL scope to IAS 36.
Key definitions you must know
Value in use
IDENTICAL definition to IAS 36 – the present value of future cash flows expected from an asset/CGU.
Cash-generating unit (CGU)
IDENTICAL definition to IAS 36 – the smallest identifiable group of assets generating cash inflows largely independent of other assets.
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Indicators of Impairment
Identical external/internal indicators to IAS 36
External indicators (market value declines, adverse technology/market/economic changes) and internal indicators (obsolescence, worse-than-expected performance) – IDENTICAL to IAS 36, assessed at EACH reporting date.
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Recoverable Amount – Fair Value Less Costs vs Value in Use
Identical to IAS 36
Example 1: Recoverable amount determination
An Indian manufacturing CGU has a carrying amount of ₹80,00,00,000. Its fair value less costs of disposal is estimated at ₹65,00,00,000, while its value in use (discounted future cash flows) is estimated at ₹72,00,00,000.
Recoverable amount = HIGHER of ₹65,00,00,000 and ₹72,00,00,000 = ₹72,00,00,000. Since this is LESS than the ₹80,00,00,000 carrying amount, an impairment loss of ₹8,00,00,000 is recognised – an IDENTICAL calculation methodology to how IAS 36 would treat the same CGU globally.
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Cash-Generating Units (CGUs)
Identical to IAS 36
Where an individual asset's recoverable amount cannot be estimated (no largely independent cash inflows), impairment is tested at the CGU level – IDENTICAL to IAS 36, genuinely significant for Indian diversified conglomerates with multiple, interdependent business lines.
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Goodwill Impairment Testing
Identical to IAS 36
Goodwill is tested for impairment ANNUALLY (regardless of indicators), allocated to the CGU(s) expected to benefit from the business combination synergies – IDENTICAL to IAS 36, with impairment losses on goodwill NEVER reversed.
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Discount Rate Practice & CGU Determination – Indian Application Context
A genuinely important practical Indian consideration
For value-in-use calculations, Indian valuation practice commonly starts from GOVERNMENT SECURITY (G-Sec) yields as the risk-free rate benchmark (given the absence of a deep, liquid high-quality corporate bond market comparable to some developed markets), building up a discount rate with appropriate equity/company-specific risk premiums – an application practice IDENTICAL in underlying principle to IAS 36's own market-based discount rate requirement, but with a distinctly Indian starting point. Separately, LARGE Indian diversified conglomerates (spanning multiple unrelated business lines) face GENUINELY significant CGU identification complexity, requiring careful analysis of cash inflow independence.
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Reversal of Impairment Losses
Identical to IAS 36
Impairment losses on assets OTHER than goodwill may be REVERSED if indicators suggest recoverable amount has increased, capped at the carrying amount that would have existed (net of depreciation) had no impairment been recognised – IDENTICAL to IAS 36. Goodwill impairment is NEVER reversed, IDENTICAL prohibition to IAS 36.
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Disclosure Requirements
Identical disclosure requirements to IAS 36
Impairment losses/reversals recognised, by class of asset and segment Key assumptions used in recoverable amount estimation (discount rate, growth rate) Goodwill carrying amount by CGU, with sensitivity disclosures
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Critical Judgments & Estimates
Where management judgement matters most
SIGNIFICANT JUDGEMENTS
CGU identification for diversified conglomerate structures Whether impairment indicators exist at each reporting date
SIGNIFICANT ESTIMATES
Discount rate selection and build-up methodology Future cash flow projections and terminal growth rate assumptions
Given the sensitivity of value-in-use calculations to discount rate assumptions, Indian auditors and regulators scrutinise the G-Sec-based build-up methodology closely, particularly for goodwill-heavy CGUs following acquisitions.
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Ind AS 36 vs IAS 36 – Full Comparison
Comprehensive comparison table
FeatureIAS 36Ind AS 36
Recoverable amount, CGU, goodwill testing frameworkStandard modelIDENTICAL – no substantive divergence
Discount rate benchmark practiceVaries by market depthCommonly built up from Indian G-Sec yields, given the absence of a deep corporate bond market
Ind AS 36 is essentially IDENTICAL to IAS 36 in substance – its distinctive Indian relevance lies in DISCOUNT RATE benchmark practice and CGU complexity for large conglomerates, not any accounting divergence.
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Statement Mapping
Comprehensive event-to-statement mapping table
Event / transactionStatement(s) affectedNotes
Impairment loss recognisedP&L Balance SheetIdentical to IAS 36 (or OCI/revaluation reserve for revalued assets)
Reversal of impairment (non-goodwill)P&L Balance SheetIdentical to IAS 36
Goodwill impairmentP&LNever reversed, identical to IAS 36
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Related Standards
Cross-reference map
StandardConnection
IAS 36The global counterpart standard, near-identically converged
Ind AS 103Generates the goodwill subsequently tested for impairment under Ind AS 36
Ind AS 113Supplies fair value measurement principles used in fair value less costs of disposal calculations
Quick-reference glossary
G-Sec yield
Government of India security yield, commonly used as the risk-free rate starting point for Indian discount rate build-ups.
Value in use
The present value of future cash flows expected from an asset/CGU, identical to IAS 36.
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Glossary
G-Sec yield
Government of India security yield, commonly used as the risk-free rate starting point for Indian discount rate build-ups.
Value in use
The present value of future cash flows expected from an asset/CGU, identical to IAS 36.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows