Impairment Recording

Under FRS 102 Section 27, ROU Assets must be tested for impairment when indicators suggest the recoverable amount may be below carrying value. Impairment losses reduce the asset and are recognised in profit or loss.

Impairment Indicators

Review ROU Assets for impairment when any of these indicators exist:

FRS 102 Reference: FRS 102 Section 27

Market Indicators

Significant decline in market rents, asset fair value has declined significantly more than expected from passage of time or normal use.

Operational Indicators

Asset becomes partially vacant or sub-optimally used, plans to dispose of or restructure operations using the asset, evidence of physical damage.

Business Environment

Significant adverse changes in the technological, market, economic, or legal environment affecting asset value.

Impairment Accounting

When impairment is identified, the following accounting applies:

FRS 102 Reference: FRS 102.27.5-27.6

Component	Impact
ROU Asset	Reduced by impairment amount
Impairment Loss	Recognised in P&L immediately
Cumulative Impairment	Tracked for disclosure purposes
Future Depreciation	Recalculated on reduced carrying value

Impairment Journal Entry

DR Impairment Loss (P&L) £15,000 CR ROU Asset £15,000

Depreciation After Impairment

Per FRS 102.27.24, after recording impairment, depreciation is recalculated based on the new carrying value over the remaining lease term:

FRS 102 Reference: FRS 102.27.24

Revised Depreciation Calculation

Original ROU Asset: £120,000 Accumulated Depreciation: £40,000 Carrying Value: £80,000 Impairment Recorded: £15,000 New Carrying Value: £65,000 Remaining Term: 36 months New Monthly Depreciation: £65,000 ÷ 36 = £1,805.56

Recording Impairment

To record impairment in Lease102: Open the lease, click Actions > Record Impairment, enter the impairment date and amount, document the reason/indicators, and save. The system automatically recalculates future depreciation.

Impairment Reversal

FRS 102 permits reversal of impairment losses (except goodwill) if circumstances that caused the impairment have improved. Record a reversal by entering a negative impairment amount.

FRS 102 Reference: FRS 102.27.28-27.30

Reversal Limit

An impairment reversal cannot increase the carrying amount above what it would have been (net of depreciation) had no impairment been recognised.

Viewing Impairment History

The Impairments tab on each lease shows all impairments recorded, including date, amount, reason, and impact on carrying value and revised depreciation amounts.

Track asset impairments

Lease102 handles FRS 102 Section 27 impairment accounting with automatic depreciation recalculation.

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