Meaning under IAS 36
Under IAS 36, an asset is impaired when its carrying amount exceeds its recoverable amount. This test differs from scheduled depreciation. Recoverable amount compares use and sale according to the standard’s definitions. Source: **curr-stat-ias36**, About, core principle and Recoverable amount.
A fall in demand can worsen the prospects of equipment even when the previous depreciation schedule is being followed. A recognized loss is not necessarily accompanied by a current payment: the money may have been spent long ago. But a non-cash character does not mean that there is no economic loss of capital.
Scope and analysis
Do not apply IAS 36 to every asset without checking its scope. Inventories, specified financial claims and other excluded items are subject to special rules. Analysis should focus on assumptions, the testing unit and the sensitivity of the result, not only on whether a write-down exists. Related reading: [financial statements roadmap](/guides/financial-statements-roadmap/) and [balance sheet](/guides/balance-sheet/).