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IAS 36 requires that at each reporting date, an entity must assess whether there are indications of impairment. One of the external sources of information for impairment indicators is INTEREST RATES HAVE CHANGED, THUS INCREASING THE DISCOUNT RATE USED IN CALCULATING THE ASSET’S VALUE IN USE.
this point is vague….. i dont get this..u know what is value is use. and how we calculate this. when interest rates fall the asset that we have on finance lease directly effected.
discount rate when increase its mean that net present value decrease. In this way our asset value in use decrease. and u know the impairment mean that when the asset’s carrying amount exceeds its recoverable amount .
and Recoverable amount is the higher of an asset fair value less cost to sell and value in use.
and value in use is the PRESENT VALUE OF ESTIMATED FUTURE CASH FLOWS.
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