Impairment test in accordance with IAS 36 Value in use and DCF-based determination of fair value

Bachelor's thesis from 2020 in the field of Business Administration - Accounting, Valuation, Taxes, grade: 1.7, Free University of Berlin, language: German.

Abstract: The aim of this thesis is to compare the value in use with the fair value determined using the DCF method, minus disposal costs, and ultimately to assess them in terms of their reliability and decision usefulness. To this end, Chapter 2 presents the conceptual and normative foundations of the impairment test according to IAS 36. Following these foundations, the focus of the thesis is on the comparison of the value in use and the fair value determined by the DCF method in Chapter 3, where differences in their determination are precisely and systematically elaborated. The assumptions underlying the determination of both forms are evaluated in the main part concerning their reliability and decision usefulness. The thesis concludes with Chapter 4, which includes a summary and an outlook. The primary objective of IFRS financial statements is to provide decision-useful (financial) information to the users of the statements. Information is considered decision-useful if it meets both the criteria of relevance and reliability. Ignoring reliability would therefore contradict the fulfillment of the primary objective of IFRS financial statements. Regularly, the recoverability of assets must be assessed when preparing IFRS financial statements, which is why the impairment test according to IAS 36 plays a central role in IFRS accounting. In this context, the recoverable amount must be determined as part of the impairment test, along with its two forms: value in use and fair value less costs of disposal.