Under IFRS, when can a previously recognized impairment loss on a long-lived asset be reversed, and how does the timing differ from US GAAP?

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IFRS takes a fundamentally different position from US GAAP on impairment reversals for long-lived assets. Understanding the timing and ceilings is essential for Level II. **When Reversal Is Permitted** Under IAS 36, at each reporting date an entity must assess whether there is any **indication that a previously recognized impairment loss may no longer exist or may have decreased**. Indicators include rising market prices, favorable regulatory changes, or improved operating performance. **Worked Example — Lennox Manufacturing Ltd:** Lennox impaired a production line by $4.2 million two years ago, writing the carrying value down from $18.0 million to $13.8 million. Depreciation continued on the impaired amount, bringing the current carrying value to $12.6 million. Without the impairment, the carrying value today would have been $15.3 million (the "depreciated historical cost"). The recoverable amount is now estimated at $16.9 million. | Item | Amount | |---|---| | Current carrying value (impaired, depreciated) | $12,600,000 | | Depreciated historical cost (no impairment) | $15,300,000 | | Current recoverable amount | $16,900,000 | | **Maximum reversal allowed** | **$2,700,000** | The reversal is capped at $15.3 million — the asset cannot exceed what it would have been without impairment. The $1.6 million excess ($16.9M - $15.3M) is ignored. \`\`\`mermaid flowchart TD A["Reporting Date"] --> B{"Indication Impairment
Has Decreased?"} B -->|"No"| C["No Action Required"] B -->|"Yes"| D["Re-estimate
Recoverable Amount"] D --> E{"Recoverable >
Carrying Value?"} E -->|"No"| C E -->|"Yes"| F["Reverse Impairment"] F --> G{"Reversal Exceeds
Depreciated Historical Cost?"} G -->|"No"| H["Full Reversal
to P&L"] G -->|"Yes"| I["Cap at Depreciated
Historical Cost"] \`\`\` **US GAAP Contrast** Under ASC 360, once an impairment loss on a long-lived asset is recognized, it **cannot be reversed** — period. The new, lower carrying value becomes the asset's cost basis going forward. This creates a permanent divergence when comparing IFRS and GAAP reporters. **Key Exam Points:** 1. Reversal goes to **profit or loss** (same line as the original impairment), not OCI. 2. The ceiling is the **depreciated historical cost** — what carrying value would have been without impairment. 3. Goodwill impairment **cannot** be reversed under either IFRS or GAAP. 4. For revalued assets under IAS 16, the reversal may go through revaluation surplus if the original impairment exceeded the surplus. Check our CFA Level II FRA module for detailed impairment case studies.

Under IFRS, when can a previously recognized impairment loss on a long-lived asset be reversed, and how does the timing differ from US GAAP?

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