IAS 36 · Not-for-Profit

Impairment Calculator
for Not-for-Profit

Calculate impairment for not-for-profit assets under IAS 36. Adapted for service-delivery assets where cash flows are limited and depreciated replacement cost may be the primary measure.

CGU / Asset

Identify the cash-generating unit or individual asset being tested and enter its carrying amount from the balance sheet.

Discount & terminal growth rate

The pre-tax discount rate reflects the time value of money and risks specific to the asset. The terminal growth rate is applied to cash flows beyond the explicit forecast period using the Gordon Growth Model.

Forecast cash flows

Enter projected pre-tax cash flows for each forecast year. IAS 36.33 limits explicit forecasts to five years unless a longer period can be justified.

Fair value less costs of disposal

IAS 36.18 defines recoverable amount as the higher of value in use and FVLCD. If FVLCD cannot be determined, value in use alone is used.

Export as working paper PDF

Download a formatted IAS 36 impairment test with sensitivity analysis. Enter your email to unlock. Plus one practical audit insight per week.

No spam. We're auditors, not marketers.

IAS 36.6: An asset is impaired when its carrying amount exceeds its recoverable amount.

IAS 36.18: Recoverable amount is the higher of fair value less costs of disposal and value in use.

IAS 36.30: Value in use reflects the present value of future cash flows expected to be derived from the asset, discounted at a pre-tax rate.

Need production-ready working papers?

Built by a practicing auditor · 14-day money-back guarantee · Free updates when standards change

IAS 36 impairment testing for Not-for-Profit

Not-for-profit (NFP) entities face a fundamental tension with IAS 36. The standard's core mechanism compares carrying amount to recoverable amount, defined as the higher of VIU and FVLCOD. VIU is built on projected cash inflows. But many NFP assets don't generate cash inflows at all. A community centre, a heritage building used for programme delivery, or a fleet of vehicles serving beneficiaries produces social outcomes rather than revenue. IAS 36.5 acknowledges this by referencing "service potential" for public sector entities, but for NFPs reporting under full IFRS (or local equivalents that incorporate IAS 36), the practical question is how to measure recoverable amount when cash flows are minimal.

The answer depends on the jurisdiction and reporting framework. Under full IFRS, an NFP must apply IAS 36 as written, which means building a VIU model using whatever cash inflows the asset generates (grant income tied to asset use, rental income from partial letting, fees charged for services). If VIU is negligible, the entity relies on FVLCOD. For specialised NFP assets with no active market (a purpose-built hospice, a modified community transport vehicle), FVLCOD may need to be estimated using depreciated replacement cost under IFRS 13's cost approach. This is a significant exercise that requires estimating the current replacement cost of the asset and adjusting for physical depreciation, functional obsolescence, and economic obsolescence. Some jurisdictions have specific NFP guidance: AASB 136 in Australia includes provisions for not-for-profit entities, and FRS 102 Section 27 in the UK applies to most UK charities with a simplified impairment model.

Common pitfalls for NFPs include failing to identify impairment indicators in the first place. Many NFPs don't have the financial reporting infrastructure to monitor asset performance against expectations, which is the internal indicator in IAS 36.12(g). A charity that purchased a building for GBP 2M five years ago may not track whether the building's contribution to service delivery has declined. External indicators are easier to spot: a decline in property values, a loss of a major grant that funded the programme using the asset, or a government policy change that reduces demand for the service. Auditors of NFPs should set planning expectations for impairment testing at the engagement planning stage and ensure management understands its obligation to monitor indicators throughout the year.

For NFP entities using this calculator, input the carrying amount of the asset or CGU. If the asset generates some cash inflows (grant income, service fees), model those in the VIU calculation. Set the discount rate to a social discount rate or the entity's borrowing rate, as many NFPs don't have a traditional WACC. The UK HM Treasury Green Book recommends a 3.5% real social discount rate for public sector appraisals, which some NFPs use as a starting reference. Terminal growth rates for grant-dependent NFPs should be conservative (0.5% to 1.5%) unless the entity has contractual multi-year funding commitments. If the VIU result is well below carrying amount, consider whether FVLCOD using depreciated replacement cost produces a higher figure.

Frequently asked questions: Not-for-Profit

How does a not-for-profit entity measure value in use when assets don't generate cash flows?
If the asset generates no cash inflows, VIU under IAS 36 is effectively zero. The entity then relies on FVLCOD as the recoverable amount. For specialised assets with no market, this often means depreciated replacement cost under the IFRS 13 cost approach. Some jurisdictions (Australia under AASB 136, for instance) provide specific NFP modifications that allow service potential to be considered.
What discount rate should a not-for-profit entity use?
IAS 36.55 requires a rate reflecting the time value of money and risks specific to the asset. NFPs without traded equity or typical debt structures can look to their borrowing rate, the rate on their bank facilities, or published social discount rates. The UK HM Treasury Green Book rate of 3.5% real (approximately 5.5% to 6.0% nominal) is a common reference point for UK charities and social enterprises.
When should a charity test donated assets for impairment?
Donated assets are recognised at fair value on receipt. After recognition, they follow the same IAS 36 rules as any other asset. If indicators arise (the building's condition deteriorates, the programme it supports loses funding, or the asset's market value drops significantly), the charity must test for impairment. The fact that the asset was donated doesn't exempt it from ongoing impairment assessment.
How does FRS 102 Section 27 differ from IAS 36 for UK charities?
FRS 102 Section 27 follows IAS 36's principles but simplifies the model. It uses "recoverable amount" as the higher of fair value less costs to sell and value in use, consistent with IAS 36. However, it doesn't require the same level of detail in discount rate derivation or disclosure. For charities that are public benefit entities, FRS 102 Section 34 provides additional guidance on impairment of assets held for service delivery, allowing a "service value" concept similar to depreciated replacement cost.

Related industry calculators

General Calculator

All industry calculators

Manufacturing Retail Technology Banking & Finance Healthcare Real Estate Insurance Energy & Utilities Agriculture Construction Logistics Professional Services
Depreciation Calculator IFRS 9 ECL Calculator Financial Ratio Calculator

Further reading