Impairment Testing

BlockchainAnalysis.io automates impairment testing for digital assets under IAS 36 -- Impairment of Assets. This is essential for entities that classify digital assets as intangible assets under IAS 38 and carry them at cost less accumulated impairment losses.

When Impairment Testing Applies

Impairment testing is required when digital assets are:

• Classified as intangible assets under IAS 38
• Carried at cost less accumulated impairment losses (the cost model)
• Not classified as financial instruments under IFRS 9 or as inventory under IAS 2

Impairment Testing Process

1. Identify Indications of Impairment

The platform automatically monitors for impairment indicators:

• The fair value of the asset has declined below its carrying amount
• Significant adverse changes in the market or regulatory environment
• The asset has been delisted from major exchanges
• Trading volume has dropped significantly

2. Determine Recoverable Amount

The recoverable amount is the higher of:

• Fair value less costs of disposal (FVLCD) — The price obtainable in an orderly sale, less selling costs
• Value in use (VIU) — The present value of future economic benefits expected from the asset

For most digital assets, FVLCD is used as the recoverable amount since value in use is difficult to determine for non-cash-generating intangible assets.

3. Compare Carrying Amount to Recoverable Amount

If the carrying amount exceeds the recoverable amount, an impairment loss is recognized.

4. Recognize Impairment Loss

The impairment loss is recognized in profit or loss and the carrying amount is reduced to the recoverable amount.

Impairment Report

The impairment testing report includes:

| Column | Description | |---|---| | Asset | Token name and ticker | | Acquisition Date | Date the asset was acquired | | Cost Basis | Original acquisition cost | | Accumulated Impairment | Total impairment losses recognized in prior periods | | Carrying Amount | Cost basis less accumulated impairment | | Fair Value (Reporting Date) | Fair value at the testing date | | Costs of Disposal | Estimated transaction costs to sell | | Recoverable Amount | Fair value less costs of disposal | | Impairment Loss | Amount by which carrying amount exceeds recoverable amount (if any) | | Revised Carrying Amount | Carrying amount after impairment |

Reversal of Impairment

Under IAS 36, impairment losses on intangible assets (other than goodwill) can be reversed if the recoverable amount increases in a subsequent period. However:

• The reversal cannot exceed the original cost basis
• The reversal is recognized in profit or loss
• The carrying amount after reversal cannot exceed what it would have been had no impairment been recognized

The platform automatically identifies potential reversals and includes them in the impairment report for review.

Generating an Impairment Test

1. Navigate to Audit > Impairment Testing in the dashboard.
2. Select the testing date (typically the reporting date).
3. Choose the reporting currency.
4. Click Run Impairment Test.
5. Review the results, paying particular attention to assets flagged with impairment losses or potential reversals.
6. Export the report as PDF or Excel for auditor review.

Lot-Level Testing

The platform performs impairment testing at the individual lot level, not at the aggregate asset level. This means that if you acquired 10 BTC across 5 separate transactions at different prices, each lot is tested independently. This approach ensures:

• Accurate matching of cost basis to fair value per acquisition
• Compliance with the specific identification method where applicable
• Greater precision in impairment loss calculations

Integration

Impairment testing results feed into:

• IFRS Reports — The impairment testing report is a component of the full IFRS reporting package.
• Disclosure Notes — Impairment data populates the impairment disclosure note automatically.
• Fair Value Schedule — Fair values used in impairment testing are sourced from the fair value schedule.