Question

Is the restoration of an impairment loss for PP&E allowed for an asset held for use? What about if the asset is held for disposal?

Answer 1

An entity is required to assess at the end of each reporting period whether there is any indication that an impairment loss recognised in prior periods for an asset may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset. An impairment loss recognised for goodwill shall not be reversed in a subsequent period.

An impairment loss recognised in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If this is the case, the carrying amount of the asset is increased to its recoverable amount.

A reversal of an impairment loss reflects an increase in the estimated service potential of an asset, either from use or from sale, since the date when an entity last recognised an impairment loss for that asset. An asset’s value in use may become greater than the asset’s carrying amount simply because the present value of future cash inflows increases as they become closer. However, the service potential of the asset has not increased. Therefore, an impairment loss is not reversed just because of the passage of time (sometimes called the ‘unwinding’ of the discount), even if the recoverable amount of the asset becomes higher than its carrying amount.

An entity should recognise an impairment loss for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell, to the extent that it has not been recognised in accordance with above. An entity should recognise a gain for any subsequent increase in fair value less costs to sell of   an asset, but not in excess of the cumulative impairment loss that has been recognised.

An entity should recognise a gain for any subsequent increase in fair value less costs to sell of a Asset held for disposal to the extent that it has not been recognised in the remeasurement of scoped out non- current assets, current assets and liablities; but not in excess of the cumulative impairment loss that has been recognised. The impairment loss (or any subsequent gain) recognised for an asset held for disposal should reduce (or increase) the carrying amount of the non-current assets in the group.

Hence, we conclude that the restoration of an impairment loss for PP&E allowed for an asset held for use and also for asset held for disposal.

Please do upvote the answer if found useful.