Impairment Calculator
for Logistics

IAS 36 impairment testing for Logistics

Logistics companies operate with thin margins and heavy asset bases. A mid-market freight, warehousing, or distribution business typically holds EUR 10M to EUR 50M in vehicles, warehouse fit-outs, handling equipment, and IT systems, plus ROU assets under IFRS 16 for leased warehouses and fleet vehicles. Goodwill arises from acquiring regional operators, last-mile delivery businesses, or specialist cold-chain providers. The combination of high carrying amounts and margin sensitivity means that relatively small changes in revenue or cost assumptions can trigger impairment. IAS 36.12(d) flags internal evidence that an asset's economic performance is worse than expected. For logistics operators, declining volumes or rising fuel costs often provide exactly that evidence.

CGU identification in logistics follows the entity's operational structure. A warehousing division operating multiple sites may have each warehouse as a separate CGU if it generates independent revenue from different clients. A fleet-based distribution business where vehicles serve multiple routes from a central hub typically treats the hub-and-fleet combination as one CGU. The challenge arises with shared infrastructure: a central sorting facility that serves both the warehousing and distribution divisions needs allocation under IAS 36.102. Auditors should check whether management's CGU structure matches internal profit reporting. If the entity tracks profitability by contract or by region rather than by asset type, the CGU boundaries should reflect that management perspective. Post-IFRS 16, the ROU assets for leased warehouses form a significant component of CGU carrying amounts, and forgetting to include them in the impairment test is a basic but frequent error.

Audit inspection findings in logistics often centre on fleet asset impairment. Vehicles depreciate on a straight-line basis over their expected useful life, but market values for second-hand commercial vehicles can drop sharply during economic downturns. The difference between carrying amount and FVLCOD may signal impairment even when VIU remains above carrying amount. For warehousing CGUs, regulators have noted that entities sometimes fail to reassess impairment indicators when key client contracts expire or are not renewed. A warehouse purpose-built for a single client's requirements faces an obvious indicator when that client exits. The VIU model should reflect the realistic timeline and cost of finding a replacement tenant, not an assumption of immediate re-letting at current rates.

For logistics CGUs, input the carrying amount of all assets in the CGU: vehicles, warehouse fit-out, handling equipment, IT systems, ROU assets, and allocated goodwill. Set the discount rate between 8.0% and 10.5% for European mid-market logistics. Adjust upward for operators with high client concentration or seasonal volatility, and downward for contracted-revenue businesses with multi-year client agreements. Terminal growth at 1.0% to 2.0% is appropriate for European logistics, which has grown broadly in line with GDP. Run sensitivity on fuel cost assumptions (a 20% increase) and volume assumptions (a 10% decline) to test headroom, as these are the two variables with the largest impact on logistics CGU profitability.