Non-current assets - part 2

In this lesson

1. 0:00 Impairment of assets: definition and recoverable amount
2. 1:20 Audit procedures for identifying asset impairment indicators
3. 2:37 Auditing management's impairment review and assumptions
4. 4:42 Biological assets and agricultural produce valuation
5. 5:41 Bearer plants accounting and land split requirements

About this lesson

You'll discover how to identify indicators of impairment, challenge management's fair value estimates and assumptions, and verify the calculations behind their impairment reviews. This session covers essential Advanced Audit and Assurance procedures for assessing whether carrying amounts in the financial statements remain reasonable, plus the specific audit approach to biological assets and agricultural produce under IFRS standards. The lesson begins by defining asset impairment—when the carrying amount exceeds the recoverable amount—and explains that recoverable amount is the higher of value in use (based on discounted future cash flows) or fair value less costs to sell. You'll learn that entities must assess impairment indicators at every reporting date, with intangible assets requiring annual review. As an auditor, your risk assessment procedures should identify internal or external indicators of impairment, such as new market competitors. If management hasn't performed an impairment review, you must discuss this with them; if they refuse, your audit opinion must be qualified due to material misstatement and lack of evidence. When auditing an impairment review that has been performed, you'll focus on challenging the judgement and estimates involved. This means recalculating management's work for mathematical accuracy, comparing their discount rates to published market rates, and scrutinising all assumptions underlying their fair value and costs to sell calculations. You'll verify these estimates are reasonable by reference to available evidence. The lesson also covers biological assets and agricultural produce—living plants, livestock, and harvest produce—which are valued at fair value less costs to sell with changes reported through profit or loss. You'll learn to verify fair values against active market prices (often requiring expert reliance), confirm costs to sell against external data, and recognise government grants as income when receivable. Crucially, you'll understand the accounting split between bearer plants (accounted for under IAS 16 as property, plant and equipment), harvested produce (inventory), and the land on which they grow (PPE or investment property), ensuring these elements are correctly separated in your audit.

Duration: 6m