Standards-anchored to primary IFRS and FASB text. Worked figures are illustrative. Not accounting advice.
TCTokenCapitalisation
Illustrative example

Scenario: a deprecated model impairment

Illustrative example
This illustrative example takes a model carried at an illustrative 450,000 and deprecated in its second year. The deprecation notice is an IAS 36 impairment indicator IAS 36 §12, the recoverable amount is reassessed IAS 36 §18, and the write-down appears on its own line in the roll-forward. All figures are made up for teaching.

The trigger Illustrative example

In the second year the provider announces that the base model the asset depends on will be withdrawn within months. That announcement is evidence of obsolescence and of an adverse change in the technological environment, an IAS 36 impairment indicator, so a recoverable-amount test is performed at once rather than deferred to year-end IAS 36 §12.

Reassessing recoverable amount

The team assesses whether the copilot can migrate to a successor model. Migration is possible but costly, and expected usage falls once the base model is withdrawn. The reassessed value in use, the present value of the reduced remaining cash flows, comes to an illustrative 90,000, below the carrying amount at that point IAS 36 §30. As there is no market for the bespoke asset, value in use governs recoverable amount IAS 36 §18.

The write-down in the roll-forward

After the first year's ordinary amortisation, the Year 2 carrying amount is written down to the 90,000 recoverable amount, with the difference shown as an impairment loss on its own line. The remaining carrying amount then amortises over the short remaining life.

PeriodOpeningAmortisationImpairmentClosingTrend
Y1$450,000($150,000)-$300,000
Y2$300,000($150,000)($60,000)$90,000
Y3$90,000($90,000)-$0
Total$450,000($390,000)($60,000)$0
Deprecated-model roll-forward with a Year 2 impairment to recoverable amount. All figures are an illustrative example.

The disclosure narrative

The note names the event, the deprecation announcement, states that recoverable amount was measured as value in use, and gives the loss. Booking the number without the narrative is the common weakness; naming the event is what makes the impairment defensible and satisfies the overlapping IAS 36 disclosure IAS 36 §18.