BCZ105 IAS 36 relies on an ‘economic’ criterion for the recognition of an impairment loss - an impairment loss is recognised whenever the recoverable amount of an asset is below its carrying amount. This criterion was already used in many International Accounting Standards before IAS 36, such as IAS 9 Research and Development Costs, IAS 22 Business Combinations, and IAS 16 Property, Plant and Equipment.

BCZ106 IASC considered that an ‘economic’ criterion is the best criterion to give information which is useful to users in assessing future cash flows to be generated by the enterprise as a whole. In estimating the time value of money and the risks specific to an asset in determining whether the asset is impaired, factors, such as the probability or permanence of the impairment loss, are subsumed in the measurement.

BCZ107 The majority of commentators on E55 supported IASC’s view that an impairment loss should be recognised based on an ‘economic’ criterion.