IAS 36 - Impairment of Assets is a key standard in accounting that aims to prevent an asset's carrying amount from exceeding its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use, the latter being the present value of the future cash flows expected to derive from the asset.

The standard provides guidance on identifying when an asset may be impaired, how to measure an impairment loss, and the steps for recognizing and reversing such losses. Impairment indicators can include a decline in market value, adverse changes in the technological, market, or legal environment, or evidence of physical damage to an asset. For example, if a manufacturing plant becomes outdated due to new technological advancements, its recoverable amount might need reassessment under IAS 36.

Entities must conduct annual impairment tests for goodwill and intangible assets with indefinite useful lives, and for other assets, tests are conducted if impairment indicators are present. The standard also requires detailed disclosures regarding impaired assets, including the assumptions and estimations involved in determining recoverable amounts.