Ind AS 36: Impairment of Assets — Detailed Guide

Standard orientation

What Ind AS 36 is designed to achieve

Ensure that assets are not carried above the amount recoverable through use or sale, prescribe impairment losses and reversals, and require transparent assumptions and disclosures.

Scope: Applies broadly to non-financial assets, including PPE, intangibles, goodwill and investments in subsidiaries, associates and joint ventures in separate financial statements, but excludes assets governed by specific measurement models such as inventory, deferred tax, employee benefits, Ind AS 109 financial assets, many insurance assets, fair-valued biological assets and held-for-sale assets.

Recoverable amount

Higher of fair value less costs of disposal and value in use.

CGU

Smallest identifiable group producing largely independent cash inflows.

Annual tests

Goodwill, indefinite-life intangibles and intangibles not yet available for use.

Reversal

Allowed for non-goodwill assets within a ceiling; never reverse goodwill.

Reading method: Paragraph references are preserved, but requirements are paraphrased and grouped where they form one integrated rule. Read with the current notified standard.

Full standard map

Paragraph-by-paragraph register

Every operative section is mapped below, including relevant appendices, omitted paragraphs and transition history.

Paragraphs	Requirement and simple decode
1	Objective Prevents assets being carried above recoverable amount and governs losses, reversals and disclosures.
2–5	Scope and exclusions Lists assets covered by other standards and confirms application to revalued assets and separate-statement investments in subsidiaries, associates and joint ventures.
6	Definitions Defines carrying amount, CGU, corporate assets, costs of disposal, fair value, impairment loss, recoverable amount, useful life and value in use.
7–10	Indicator test and mandatory annual tests Assess indicators at each reporting date; test goodwill, indefinite-life intangibles and not-yet-available intangibles annually regardless of indicators.
11–12	External indicators Consider market-value decline, adverse technology/market/economic/legal changes, interest/return increases and market-capitalisation evidence.
13–14	Internal indicators Consider obsolescence/damage, adverse use changes, restructuring, disposal plans and internal evidence of worse performance.
15–17	Materiality and prior calculations A prior recoverable-amount calculation may be reused only when assets/liabilities, likelihood of shortfall and relevant events have not changed materially.
18–23	Recoverable amount fundamentals Recoverable amount is the higher of FVLCD and VIU; either measure can establish no impairment. Test individual assets unless they do not generate independent cash inflows.
24	Indefinite-life intangible simplification A recent detailed calculation may be carried forward only when prescribed conditions and low risk of shortfall are met.
25–29	Fair value less costs of disposal Use Ind AS 113 fair value and deduct direct incremental disposal costs, excluding finance costs and income tax.
30–33	Value-in-use components Estimate future cash flows from continuing use and disposal, expectations about variation, time value, asset-specific uncertainty and other market factors.
34–38	Budgets, forecasts and extrapolation Use reasonable supportable assumptions, approved budgets generally up to five years unless longer period justified, and steady/declining growth beyond forecast unless higher rate justified.
39–41	Cash-flow content and consistency Include inflows from use, necessary outflows and disposal cash flow; use internally consistent assumptions and avoid double-counting risk.
42	Foreign-currency cash flows Estimate in the currency generated, discount using appropriate rate and translate present value at reporting-date spot rate.
43–46	Future restructuring and improvements Exclude benefits/cost savings from uncommitted restructuring and future enhancements not yet incurred; include committed restructuring effects consistently.
47–49	Future cash flows and asset condition Base projections on current condition and include necessary maintenance/replacement cash flows.
50–53	Financing, tax and inflation Exclude financing and income-tax cash flows; maintain consistency between nominal/real cash flows and discount rates.
54–57	Discount rate Use pre-tax rate reflecting time value and asset-specific risks not already in cash flows; derive from market evidence where possible.
58–61	Individual impairment loss Recognise carrying amount above recoverable amount immediately in P&L unless treated as a revaluation decrease; adjust future depreciation/amortisation.
62–64	Liability interaction and deferred tax Recognise a liability only when another standard requires it; consider deferred tax arising from impairment.
65–73	Identifying CGUs Use the smallest independent cash-inflow group and apply identification consistently unless change is justified.
74–79	CGU recoverable and carrying amount Determine on a consistent basis, include only assets/liabilities relevant to recoverable amount, and address recognised liabilities where disposal requires assumption.
80–87	Goodwill allocation Allocate goodwill from acquisition to CGUs/groups expected to benefit, at no larger than an operating segment before aggregation; complete allocation by the permitted deadline.
88–90	Disposal/reorganisation and goodwill Include attributable goodwill on disposal; reallocate goodwill using relative values when CGU composition changes unless another method better reflects association.
91–99	Timing and order of annual tests Test goodwill CGUs annually at a consistent time; test acquired goodwill by year-end if acquisition occurs during period; test assets before the goodwill CGU.
100–103	Corporate assets and sequencing Allocate corporate assets reasonably where possible and test relevant groups when allocation cannot be made; assess individual assets/CGUs before broader unit.
104–108	CGU impairment allocation Reduce goodwill first, then other assets pro rata, but not below the highest of FVLCD, VIU and zero; recognise unresolved excess liabilities only if another standard requires.
109–116	Reversal indicators and changed estimates Assess reversals when indicators improve. A reversal reflects changed estimates, not merely discount unwinding, and resets future depreciation.
117–121	Individual-asset reversal Increase carrying amount only up to the amount that would exist without prior impairment; treat revalued assets consistently with revaluation requirements.
122–123	CGU reversal Allocate reversal pro rata to non-goodwill assets, subject to individual carrying ceilings.
124–125	Goodwill reversal prohibited Never reverse recognised goodwill impairment, including when recovery appears related to internally generated goodwill.
126–133	General disclosures Disclose impairment/reversal by asset class and segment, material events, amounts, asset/CGU nature, reportable segment and recoverable-amount basis.
134–137	Goodwill and indefinite-life disclosure For significant CGUs disclose carrying amounts, valuation basis, key assumptions, forecast period, growth and discount rates, and sensitivity where reasonably possible changes eliminate headroom.
138–141	Transition and effective-date history Tracks fair-value, IFRS 9/15/16/17 and other amendments; use current notified scope and wording.
Appendix A	Present-value techniques Provides traditional and expected-cash-flow approaches, probability weighting, risk adjustment and consistency principles.
Appendix C	Goodwill with non-controlling interests Gross up partially recognised goodwill for impairment testing and allocate loss between parent and NCI consistently.

Major areas decoded

Technical requirements in simple language

Indicator discipline

A weak market capitalisation, rising interest rates, persistent underperformance or climate/regulatory change can trigger testing before annual budget season.

CGU boundaries

CGUs are based on independent cash inflows, not management convenience. Product lines, stores, routes or plants may be CGUs depending on market and transfer-pricing facts.

Value in use

VIU is entity-specific but not management fantasy. It excludes uncommitted restructuring and future enhancements, uses approved forecasts and disciplined terminal growth.

Goodwill allocation

Goodwill is tested where synergies are monitored, but not above an operating segment before aggregation. Late or strategic reassignment is a major audit risk.

Headroom and sensitivity

A small impairment is not the only risk. Thin headroom and assumptions near market limits demand robust sensitivity disclosure.

Reversals

Improved external or internal evidence may reverse non-goodwill losses, but the asset cannot exceed its hypothetical no-impairment carrying amount.

International project alert

IASB is redeliberating proposed IAS 36 changes, including goodwill allocation and value-in-use mechanics. These proposals are not current Indian requirements.

Visual learning

Finin2min decision map

Editable SVG and high-resolution PNG versions are included in the batch assets folder.

Exceptions and high-risk points

What professionals frequently overlook

One of FVLCD or VIU is enough when it clearly exceeds carrying amount.
Annual testing can occur at any consistent time, and different assets/CGUs may be tested at different times.
A recent indefinite-life calculation can be reused only when strict conditions indicate remote risk of impairment.
Goodwill impairment is allocated before other CGU assets.
No asset is reduced below its individual recoverable floor or zero.
Corporate assets require allocation or broader-group testing.
Reversals cannot create a carrying amount above the no-impairment amount.
Goodwill impairment is never reversed.
Cash flows and discount rates must use consistent nominal/real and risk assumptions.

Practical application

Transaction examples

Fact pattern

Treatment

Reason

Plant market value collapses after regulatory ban

Indicator

Estimate recoverable amount even if accounting profit remains positive.

Brand with indefinite useful life

Annual test

Test every year and when indicators arise.

Retail stores with independent customers

Possible CGUs

Each store may be a CGU if inflows are largely independent.

Corporate headquarters

Corporate asset

Allocate reasonably to CGUs or test at a broader level.

CGU loss containing goodwill

Allocate goodwill first

Then reduce other assets pro rata subject to floors.

Recovery in machine demand after prior impairment

Potential reversal

Reverse within hypothetical no-impairment carrying amount.

Accounting mechanics

Illustrative journal entries

Entries are simplified and exclude tax, GST, foreign-currency and entity-specific presentation effects unless stated.

Impairment of individual cost-model asset

Dr Impairment loss Cr Accumulated impairment / Asset

CGU impairment

Dr Impairment loss Cr Goodwill Cr Accumulated impairment — other CGU assets

Reversal for non-goodwill asset

Dr Accumulated impairment / Asset Cr Reversal of impairment gain

Revalued asset impairment

Dr Revaluation surplus / OCI (to available balance) Dr Impairment loss (excess) Cr Asset / Accumulated impairment

CA / finance / boardroom cases

Applied case studies

1. Market capitalisation below net assets

Applied case

A listed entity’s market capitalisation has remained 35% below carrying net assets for six months.

Finin2min analysis: This is strong external evidence requiring impairment analysis. It does not mechanically set recoverable amount, but the reconciliation and unrecognised business value must be robust.

2. Uncommitted restructuring

Applied case

Management’s VIU assumes closure of two plants and 25% cost savings, but no detailed formal plan or valid expectation exists.

Finin2min analysis: Exclude uncommitted restructuring savings and associated costs from VIU.

3. Goodwill allocation after reorganisation

Applied case

Management moves goodwill from an underperforming CGU to a profitable business after internal reporting is reorganised.

Finin2min analysis: Reallocation must follow relative values or another demonstrably better method and reflect where synergies are now monitored; it cannot be used to conceal impairment.

4. Negative headroom

Applied case

CGU carrying amount is ₹500 crore. FVLCD is ₹430 crore and VIU is ₹470 crore.

Finin2min analysis: Recoverable amount is ₹470 crore; recognise ₹30 crore impairment, allocating goodwill first.

5. Reversal ceiling

Applied case

An asset impaired to ₹60 crore would have carried at ₹82 crore without impairment. Current recoverable amount is ₹95 crore.

Finin2min analysis: Reverse only to ₹82 crore, not ₹95 crore.

Global comparison

Ind AS versus IFRS and US GAAP

Topic	Ind AS	IFRS	US GAAP
Long-lived asset test	One-step comparison with higher of FVLCD and VIU.	Broadly aligned with IAS 36.	US GAAP held-for-use model first uses undiscounted cash flows for recoverability, then fair value for measurement.
CGU versus asset group	Smallest independent cash-inflow group.	Broadly aligned.	US GAAP asset-group level is based on largely independent cash flows and may differ.
Impairment reversal	Allowed for non-goodwill assets within ceiling.	Broadly aligned.	Generally prohibited for held-for-use long-lived assets.
Goodwill test	Allocated to CGUs/groups no larger than operating segment before aggregation.	Broadly aligned.	Tested at reporting-unit level; qualitative screen may be used.
Goodwill reversal	Prohibited.	Prohibited.	Prohibited.
VIU	Entity-specific discounted cash flows with current-condition restrictions and pre-tax disclosure mechanics.	Current IAS 36 broadly aligned; proposals under redeliberation.	No direct VIU equivalent in the US long-lived asset model.

Comparison caution: “Broadly aligned” does not mean identical. Apply entity type, regulator, transition date, statutory format and current amendments.

Implementation lens

Implications for key stakeholders

CFO / Board

Own impairment governance, challenge optimism and approve significant CGU and goodwill conclusions.

FP&A

Provide reconciled forecasts, downside scenarios and bridge to board-approved plans.

Valuation specialists

Support WACC/discount rates, market multiples, terminal growth and FVLCD.

Operations

Evidence capacity, obsolescence, shutdowns, asset condition and independent inflows.

Audit committee

Focus on headroom, sensitivity, market-cap gap, delayed testing and goodwill allocation.

Quality-control watchlist

Common errors and exam traps

Testing goodwill only when an indicator exists.
Defining CGUs at an artificially high level.
Using unapproved or optimistic forecasts without external consistency.
Including uncommitted restructuring savings.
Including financing and tax cash flows in VIU.
Double-counting risk in cash flows and discount rate.
Using terminal growth above supportable long-term market growth.
Failing to test individual assets before a goodwill CGU.
Reducing assets below their individual recoverable floors.
Reversing goodwill impairment.
Ignoring market capitalisation below net assets.
Omitting sensitivity disclosure when reasonably possible assumption changes remove headroom.
Treating discount unwinding alone as a reversal indicator.
Failing to gross up goodwill for NCI in a partial-goodwill CGU test.

Finin2min Q&A

Frequently asked questions

1. What is recoverable amount?

The higher of fair value less costs of disposal and value in use.

2. When is annual testing mandatory?

For goodwill, indefinite-life intangibles and intangibles not yet available for use.

3. What is a CGU?

The smallest identifiable asset group generating cash inflows largely independent from other assets or groups.

4. Can goodwill impairment be reversed?

No.

5. Can other impairment losses be reversed?

Yes when estimates improve, subject to the no-impairment carrying ceiling.

6. Can VIU include future restructuring savings?

Only when the entity is committed and the assumptions comply with the standard.

Two-minute revision

Finin2min cheat sheet

IMPAIR = Indicators → Measure higher of FVLCD/VIU → Pick asset or CGU → Allocate loss → Review reversal

Document the facts, recognition trigger, measurement basis, cross-standard interaction, significant judgement and disclosure consequence.

Validation register

Primary and authoritative sources

ICAI 2025–26 Ind AS 36 official HTMLPrimary or authoritative reference used for validation.
Open source ↗

ICAI Educational Material — Ind AS 36, February 2026Primary or authoritative reference used for validation.
Open source ↗

IFRS Foundation — IAS 36Primary or authoritative reference used for validation.
Open source ↗

IFRS project — Business Combinations, Goodwill and ImpairmentPrimary or authoritative reference used for validation.
Open source ↗

FASB — Long-lived asset impairment summaryPrimary or authoritative reference used for validation.
Open source ↗

Review date: 26 June 2026. Recheck later MCA notifications, ICAI compendiums and final international amendments before using this article for a later reporting period.

Source and review trail

Use the current official instrument, portal or regulator publication before acting. Page-specific references are listed below.

Primary category: Accounting, Audit & Ind AS
Official starting point: www.icai.org

Page source links

Finin2min editorial notice

in the original commentary, explanations, examples, visual maps, case studies, questions and summaries.

Indian Accounting Standard names, paragraph references and underlying requirements are based on standards notified by the Ministry of Corporate Affairs and related ICAI materials. Rights in official source material remain with the respective owners. This independent educational interpretation does not reproduce or replace the notified standards.

Disclaimer: This material is for education and general professional awareness. It is not accounting, audit, legal, tax or investment advice. Apply the current notified standard, Schedule III, regulatory requirements, contracts and entity-specific facts.

Next in the master series
Ind AS 37 — Provisions, Contingent Liabilities and Contingent Assets

Explore Ind AS Hub

MCA-notified Ind AS 36: primary-text control

For Ind AS 36, the Companies (Indian Accounting Standards) Rules and the MCA-notified text control the Indian financial statements. ICAI educational material and IFRS resources can assist interpretation, but they do not replace this notified Indian text or later MCA amendments.

MCA notified Ind AS 36 MCA standards repository

Recoverable amount and CGU discipline

Fix the cash-generating unit consistently, reconcile forecasts to approved budgets, support discount and terminal-growth assumptions, allocate corporate assets and goodwill correctly, and disclose sensitivity where a reasonably possible change matters.

Freeze the reporting date, applicable Ind AS roadmap and current MCA amendments.
Map the recognition, measurement, presentation and disclosure requirements to entity-specific contracts and ledger populations.
Retain management judgements, source data, model controls and reviewer evidence.
Reconcile the note disclosures to the financial statements and audit file, including prior-period comparatives.

Exam and advisory check

For Ind AS 36, a correct answer begins with the scope and facts, identifies the recoverable amount and cgu discipline issue, applies the notified paragraphs, quantifies the accounting entry, and then states the required presentation and disclosures. A conclusion based only on an international summary should be checked for Indian carve-outs and amendment dates.

Finin2min summary: anchor the analysis in the MCA-notified Ind AS 36, document judgements and reconcile every conclusion to the books and disclosures.