Sometimes in exam questions

you get given an impairment indicator..

And it's vital you know it is one and that therefore you should do an impairment review

So what is an impairment indicator?

Simply they are scenarios which suggest your assets may have a recoverable amount
below the carrying value

Give me some examples mama

1. Company making losses

2. Fall in MV generally of those assets
3. Damage to the asset
4. Change in the environment (politically, legally, economically, technologically)
5. Increase in interest rates (meaning people can't afford loans so buy less assets
so asset value falls)
6. Loss of key employees (so the assets can't generate as much and so worth
less)
7. Restructuring of the organisation
8. When the asset value on the SFP is more than the market value of shares

That's it - learn them well - now try this question:

Which of the following is NOT an indicator of impairment?

A Advances in the technological environment in which an asset is employed have an

adverse impact on its future use

B An increase in interest rates which increases the discount rate an entity uses

C The carrying amount of an entity’s net assets is higher than the entity’s number of
shares in issue multiplied by its share price
 D The estimated net realisable value of inventory has been reduced due to fire
damage although this value is greater than its carrying amount

The answer is here

D
Although the estimated NRV is lower than it was (due to fire damage), the entity will still
make a profit on the inventory and thus it is not an indicator of impairment.