Wear and worsening prospects are different events
The recoverable amount is the higher of value in use and fair value less costs of disposal.[1](#source-curr-stat-ias36) It is not a choice of whichever convenient number looks safer. A fictional line has carrying amount 900; value in use is 760 and sale after disposal costs would yield 810. Recoverable amount is 810 and impairment is 90. Averaging 760 and 810 would invent a third basis.
A margin is not cash or guaranteed profit
With the same carrying amount, a model producing recoverable amount 960 leaves a margin of 60. This is distance between estimates under chosen assumptions, not a cash reserve or guaranteed profit. Sales, margin or discount-rate changes can remove it. Compare forecasts with actual utilization and demand; challenge the assumption, not merely the existence of a model.
Why the unit boundary matters
A grouping that is too broad can hide a weak asset behind a strong division; one that is too narrow can assign cash flows the asset does not generate independently. Compare the unit description with the business and prior period. A boundary change needs explanation, especially if the conclusion changes, but an analyst should not call every reorganization a violation automatically.
Impairment is not proof of a current cash payment. Cash may have left at acquisition. Nor should a loss be automatically added back while its economic cause is forgotten. An analytical adjustment may help compare operations, but it does not restore invested capital.
Frequency and reversal need qualifications
IAS 36 provides annual assessment for acquired goodwill and certain intangible assets and testing for other assets when indicators exist. It prohibits reversal of goodwill impairment.[1](#source-curr-stat-ias36) Do not apply one rule to all assets, including inventory and receivables governed by other standards.
Read sensitivity without pricing the business yourself
Notes may disclose key parameters and the change that would eliminate the margin. A small margin reduction and a large long-term-growth change are different sensitivities; compare meaning and units, not only the size of the number. Independent changes cannot be assumed to add linearly. Compare ramp-up, utilization and maintenance investment with history. If sensitivity is not disclosed, describe dependence qualitatively rather than publishing a precise alternative loss from an incomplete model. Separate documented recognition, disclosed assumptions and your own concern.
Upward revaluation is not reversal of every loss
IAS 36 limits overstated carrying amounts; it does not give general permission to raise an asset to any higher estimate. IAS 16 is a separate subsequent-measurement model for property, plant and equipment. If chosen, fair value is measured at the revaluation date, followed by depreciation and impairment; the policy applies to the whole class, not one fortunate building. Basis: curr-stat-ias16-text, paragraphs 29–31, 34, 36–38.
Revaluation increases normally go through other comprehensive income and a revaluation reserve; a reversal of an earlier loss recognized in profit or loss goes there first. A decrease uses that asset’s reserve before profit or loss.[2](#source-curr-stat-ias16-text) A reserve is an equity component, not cash and not a creditor provision. In a tax-free illustration, carrying amount 600 and fair value 780 produce an increase of 180. If fair value then falls to 540, the 240 decrease uses the 180 reserve and records loss of 60. A different building’s reserve cannot be used.
After revaluation, depreciation and tax change
After revaluation to 780, with six full years remaining and residual value 60, straight-line depreciation is (780 − 60) / 6 = 120 per year. Without revaluation at 600 it would be 90. The 30 difference reduces future profit; a non-cash revaluation does not make future use free. IAS 16 permits transfer of realized reserve directly to retained earnings, not through current profit, but that does not cancel depreciation.[2](#source-curr-stat-ias16)
If tax base remains 600 and a fictional 20% rate applies, the 180 temporary difference creates deferred tax liability 36, so simplified net equity increase is 144, not 180. This assumes recognition conditions and no other differences. Tax follows the related event; an off-profit revaluation does not automatically send its tax to current profit.