7.3 Impairment of Assets

7.3.1 An entity shall assess at each reporting date whether there is any indication that an asset may be impaired.

7.3.2 A non-cash generating asset is impaired when the carrying amount of the asset exceeds its recoverable service amount. In assessing whether there is any indication that an asset may be impaired, an entity shall consider, as a minimum, the following indications:

a. External sources of information

1. Cessation, or near cessation, of the demand or need for services provided by the asset;

2. Significant long-term changes with an adverse effect on the entity have taken place during the period, or will take place in the near future, in the technological, legal or government policy environment in which the entity operated.

b. Internal sources of information

1. Evidence is available of physical damage of an asset;

2. Significant long-term changes with an adverse effect on the entity have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is expected to be used. These changes include the asset becoming idle, plans to discontinue or restructure the operation to which an asset belongs, or plans to dispose of an asset before the previously expected date and reassessing the useful life of an asset as finite rather than indefinite;

3. A decision to halt the construction of the asset before it is complete or in a usable condition; and

4. Evidence is available from internal reporting that indicates that the service performance of an asset is, or will be, significantly worse than expected. Where demand for service ceases, or nearly ceases, the asset used to provide these services may be impaired.

c. Other indications of impairment

1. During the period, an asset's market value has declined significantly more than would be expected as a result of the passage of time or normal use.

2. A significant long-term decline in the demand or services provided by the asset.

7.3.3 Measuring Recoverable Service Amount (RSA)

a. RSA is the higher of the asset's fair value less costs to sell and the value in use.

b. If neither the Fair Value less costs to sell and the value in use exceeds the carrying amount, the asset is not impaired.

c. In determining the value in use:


Cash Generating Non-Cash Generating
Value in use




Present Value (PV) of estimated cash flows from continuing use of the asset and disposal at the end of its life.


PV of the remaining service potential




d. Service potential is the ability of an asset to generate future cash flows.


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