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Ireland

IAS 36 impairment testing in Ireland: IAS 36 as adopted by the EU (for IFRS reporters); FRS 102 Section 27 (for entities applying Irish/UK GAAP)

Ireland's financial reporting framework mirrors the UK's dual-standard approach. Entities listed on Euronext Dublin (formerly the Irish Stock Exchange) apply EU-adopted IFRS, including IAS 36. Non-listed entities may apply FRS 102 (which Ireland and the UK share) or EU-adopted IFRS voluntarily. FRS 102 Section 27 governs impairment for non-IFRS reporters, following the same principles as in the UK. Ireland's economy features a distinctive mix: a large multinational presence (particularly US technology and pharmaceutical companies with European headquarters in Ireland), a growing domestic SME sector, and a significant financial services sector (banks, insurance companies, and fund administrators). Each segment creates different impairment testing demands. The multinational presence means Irish auditors frequently deal with CGUs that are nodes in a global group structure. An Irish-headquartered technology company might have its primary CGU generating revenue across Europe but with assets (IP, data centres, office buildings) booked in Irish entities. Determining whether the Irish entity constitutes its own CGU or is part of a larger group CGU requires careful analysis of cash flow independence under IAS 36.66. For domestic Irish businesses, impairment testing is shaped by Ireland's small, open economy, which is sensitive to external shocks (Brexit disrupted supply chains for many Irish exporters to the UK) and property market cycles (particularly relevant for real estate and banking).

Regulatory context: Irish Auditing and Accounting Supervisory Authority (IAASA)

IAASA conducts both financial reporting examinations (reviewing listed companies' annual reports) and audit quality inspections (reviewing audit files at PIE audit firms). On the financial reporting side, IAASA has identified impairment testing disclosures as a recurring area of findings. Its 2023 activity report noted that listed entities frequently fail to provide adequate IAS 36.134 disclosures, particularly the specific discount rates and growth rates used for each material CGU. IAASA has issued observation letters to companies requesting additional disclosure or restatement of impairment-related information. On the audit quality side, IAASA's inspection findings mirror those of other European regulators. Common deficiencies include insufficient auditor challenge of management's VIU model assumptions, failure to build an independent discount rate estimate, and over-reliance on management's experts without adequate ISA 620 evaluation. IAASA has also noted that for Irish banking sector audits, impairment of goodwill from prior acquisitions has been a focus area, particularly for the domestic banks that completed significant restructuring after the 2008 financial crisis.

Practical guidance for Ireland

Irish entities applying IAS 36 derive discount rates using eurozone inputs, similar to the Dutch and Belgian approach. Irish government bond yields serve as the local risk-free rate benchmark, though they trade at a modest premium to German Bunds (typically 30 to 70 basis points). The equity risk premium for the Irish market is estimated at 5.5% to 6.5%. For multinational entities headquartered in Ireland but with global operations, each CGU needs a discount rate reflecting its specific geographic and operational risk. FRS 102 reporters in Ireland follow the same approach as UK FRS 102 reporters for impairment. Section 27 requires testing when indicators exist, uses VIU with a pre-tax discount rate, and permits goodwill amortisation (with a rebuttable presumption that useful life doesn't exceed five years, extendable to ten years with justification under FRS 102 Section 19.23). Irish auditors working on FRS 102 engagements should reference IAASA's guidance and the Chartered Accountants Ireland (CAI) technical resources for practical application.

Audit expectations

IAASA expects Irish auditors to demonstrate independent evaluation of impairment assumptions consistent with ISA 540 requirements. For entities where impairment is a key audit matter, IAASA scrutinises whether the audit report's KAM disclosure reflects the actual depth of work performed. IAASA has noted that some KAM descriptions provide generic language about "evaluating key assumptions" without identifying which assumptions were most sensitive or what the auditor's conclusion was on each. For FRS 102 engagements, IAASA expects the same proportionate rigour, recognising that smaller entities have simpler models but still require documented auditor judgment.

Ireland-specific considerations

Ireland's corporate tax regime (the headline 12.5% rate for trading income, moving to 15% for large groups under the OECD Pillar Two framework) directly affects impairment testing through the pre-tax to post-tax discount rate conversion. Ireland's low tax rate means the difference between pre-tax and post-tax discount rates is smaller than in higher-tax jurisdictions, which can affect the sensitivity of VIU to discount rate changes. Auditors should calculate the pre-tax rate correctly using the iterative method under IAS 36.BCZ85 with the applicable Irish rate, not the rate of the CGU's operational jurisdiction if different from the booking entity. Ireland's transfer pricing rules (Section 835AA to 835AI of the Taxes Consolidation Act 1997) affect how cash flows are allocated between Irish entities and other group members. For multinational groups, the Irish CGU's VIU should reflect arm's length intercompany pricing, not inflated internal transfer prices that overstate the Irish entity's contribution. The Revenue Commissioners have been increasingly active in enforcing transfer pricing rules, and any adjustment to transfer pricing would directly affect the cash flows in the VIU model. Ireland's Section 291A of the Companies Act 2014 also restricts distributions to distributable profits, so an impairment charge has the same dividend restriction implications as in the UK.

Common inspection findings

Auditors did not build an independent discount rate estimate, instead accepting management's rate without verifying the inputs against current market data (IAASA inspection 2023)

IAS 36.134 disclosures omitted the specific discount rate and growth rate used for individual material CGUs (IAASA financial reporting examination 2023)

For entities with prior-year impairment charges, auditors did not adequately assess whether reversal indicators existed under IAS 36.110 (IAASA inspection 2022)

KAM descriptions for impairment testing provided generic language without identifying the specific assumptions tested or the auditor's conclusion (IAASA inspection 2023)

Auditors of Irish banking sector entities did not adequately challenge goodwill impairment assumptions for legacy acquisitions from the pre-crisis period (IAASA inspection 2022)