BCZ96 Supporters of the ‘permanent’ criterion argue that:

(a) this criterion avoids the recognition of temporary decreases in the recoverable amount of an asset.

(b) the recognition of an impairment loss refers to future operations; it is contrary to the historical cost system to account for future events. Also, depreciation (amortisation) will reflect these future losses over the expected remaining useful life of the asset.

This view was supported by only a few commentators on E55 Impairment of Assets.

BCZ97 IASC decided to reject the ‘permanent’ criterion because:

(a) it is difficult to identify whether an impairment loss is permanent. There is a risk that, by using this criterion, recognition of an impairment loss may be delayed.

(b) this criterion is at odds with the basic concept that an asset is a resource that will generate future economic benefits. Cost‑based accrual accounting cannot reflect events without reference to future expectations. If the events that led to a decrease in recoverable amount have already taken place, the carrying amount should be reduced accordingly.