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Hi there,
I just have a small assumption and I just want to make sure it is true
Is fair value adjustment a form of impairment
I assumed that fair value adjustment is an impairment because the carrying value of the the asset is different from that of a balance sheet. (lets assume the carrying value is less than the balance sheet value)
Thus it matches the definition of impairment right??
Hi,
An impairment is where there is a reduction in the value of an asset (e.g. PPE or intangibles) or a CGU. The asset/CGU is impaired if the CV is greater than the recoverable amount. All of this is covered in IAS 36.
A fair value adjustment is an adjustment made when we are group accounting and is where we reflect the fair value of the assets/liabilities in the subsidiary prior to consolidating. This adjustment can either increase or decrease the value of the assets/liabilities. All of this is covered in IFRS 3.
Hope that clears it up for you.
Thanks
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