Impairment of development costs
Impairment occurs when a capitalised development asset’s carrying amount exceeds its recoverable amount. Recognise the reduction as an impairment loss under the applicable requirements; future amortisation uses the revised amount over the remaining useful life. Development expenditure not yet available for use requires annual impairment testing, as well as testing when impairment indications arise. Impairment is separate from routine amortisation.
Worked example
A development asset has a carrying amount of $60,000 but recoverable amount of $42,000: recognise an $18,000 impairment loss.
Common mistake
A disappointing project is not kept at cost just because it once met capitalisation criteria; reassess recoverability rather than waiting for commercial sales.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Supporting | July 2027–August 2028 |
| FIA | FFA | Direct | September 2026–June 2027 |
