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Asset Impairment Testing Calculator

Run an IAS 36 impairment test — compare carrying amount with recoverable amount (fair value less costs of disposal vs value in use).

Carrying amount (book value) ($)

Fair value less costs of disposal ($)

Value in use

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Everyday Uses

Year-end book checks

Test whether equipment or property is carried above its recoverable amount before closing the books.

Idle asset decisions

A machine that lost its market has to be written down — see by how much.

Audit preparation

Document impairment calculations the way auditors expect: carrying value versus recoverable amount.

Accounting coursework

Practice IAS 36-style impairment mechanics with clear inputs and outputs.

Not the same as depreciation

Depreciation spreads a known cost across an expected life. Impairment recognises that value has fallen faster than the schedule assumed. They are separate events with separate triggers.

Goodwill from acquisitions

Goodwill sits on the balance sheet until it is tested. A large write-off is usually a formal admission that an acquisition did not deliver what was paid for.

Frequently Asked Questions

What is asset impairment?

An asset is impaired when its carrying amount (book value) exceeds its recoverable amount — the cash the business can realistically recover through use or sale. Under IAS 36, the recoverable amount is the higher of (1) fair value less costs of disposal and (2) value in use, which is the present value of the future cash flows the asset will generate. The excess must be written off as an impairment loss in profit or loss.

How do you calculate value in use?

Value in use is the present value of the future cash flows expected from the asset: project cash flows over its remaining useful life (based on reasonable, supportable budgets — normally max 5 years plus a steady growth extrapolation), then discount them at a pre-tax rate reflecting current market assessments of the time value of money and asset-specific risk. This calculator lets you enter value in use directly or estimate it from an annual cash flow, growth rate, useful life, and discount rate.

When must a company test assets for impairment?

IAS 36 requires testing whenever there is an indication of impairment — external signs (market value decline, adverse market/legal changes, rising interest rates) or internal signs (obsolescence, physical damage, underperformance, restructuring plans). Goodwill, indefinite-life intangibles, and intangibles not yet in use must additionally be tested at least annually regardless of indicators.

Can an impairment loss be reversed?

Under IFRS (IAS 36), impairment losses on most assets are reversed if the recoverable amount recovers — but only up to the carrying amount that would have existed had no impairment been recognised. Impairment of goodwill can never be reversed. Under US GAAP (ASC 360/350), impairment reversals are prohibited for assets held for use, which is a key IFRS–GAAP difference.