Yes, for every asset except goodwill. FRS 102 requires an impairment loss to be reversed if, and only if, the reasons for it have ceased to apply (paragraph 27.29), but never above the depreciated amount the asset would have had without the impairment. A goodwill impairment can never be reversed (paragraph 27.28).

When must an impairment loss be reversed?

Reversal is not optional. Paragraph 27.29 requires a business to assess at each reporting date whether there is any indication that an earlier impairment loss may no longer exist or may have decreased. The indications are generally the opposite of the impairment indicators in paragraph 27.9: a significant rise in market value, favourable changes in the market, economic, technological or legal environment, a fall in market interest rates, or internal reporting showing that performance is better than expected.

If there is such an indication, the business must re estimate recoverable amount and decide whether all or part of the loss should be reversed. The key test is that the reasons for the loss have ceased to apply. A higher value that comes only from the passage of time, because cash flows are now closer and so discounted less, is not on its own a change in the reasons for the loss. The original impairment test is covered in FRS 102 Section 27: impairment of assets.

Why can a goodwill impairment never be reversed?

Paragraph 27.28 states the rule without exception: an impairment loss recognised for goodwill shall not be reversed in a later period. When a unit is reversed, paragraph 27.31 allocates the reversal only to assets other than goodwill.

The reasoning is that once purchased goodwill has been written down, any later recovery in the value of the business is very likely to reflect goodwill the business has built up itself since the acquisition. Paragraph 18.8C(f) of FRS 102 prohibits recognising internally generated goodwill as an asset, so reinstating written off goodwill would bring internally generated goodwill onto the balance sheet by another route. The rule also stops goodwill being written down in a bad year and written back in a good one. The amortisation rules that continue to apply to any remaining goodwill are covered in goodwill useful life and amortisation.

How is a reversal measured for a single asset?

Where the original loss was based on the recoverable amount of the individual asset, paragraph 27.30 requires the business to:

  1. estimate the asset’s recoverable amount at the current reporting date;
  2. increase the carrying amount to that recoverable amount if it is higher;
  3. cap the increase so that the carrying amount does not exceed what it would have been, net of depreciation or amortisation, if no impairment had ever been recognised; and
  4. recalculate future depreciation on the revised carrying amount less any residual value over the remaining useful life.

The reversal goes to profit or loss, unless the asset is carried at a revalued amount, in which case it is treated as a revaluation increase under the relevant section (paragraph 27.30(b)). See revaluation of fixed assets.

What does a worked example look like?

Illustration only. A machine costs £100,000 with a ten year life and no residual value, so depreciation is £10,000 a year.

Point in time Actual carrying amount Carrying amount if never impaired
End of year 2, before impairment £80,000 £80,000
End of year 2, impaired to recoverable amount £48,000 £80,000
End of year 4, after two years at £6,000 £36,000 £60,000
End of year 4, after reversal £60,000 £60,000

The year 2 loss of £32,000 leaves £48,000 to depreciate over eight years at £6,000 a year. By the end of year 4 the market has recovered and recoverable amount is £70,000. The carrying amount can only rise to £60,000, the amount it would have had without the impairment, so the reversal is £24,000 rather than £34,000. Depreciation for the remaining six years becomes £10,000 a year.

How does a reversal work for a cash generating unit?

Where the original loss was calculated for a cash generating unit, paragraph 27.31 applies. The recoverable amount of the unit is estimated again and any excess over its carrying amount is a reversal. It is allocated to the assets of the unit, excluding goodwill, pro rata to their carrying amounts. No asset can be increased above the lower of its own recoverable amount and its depreciated carrying amount had no impairment been recognised. Any amount that cannot be allocated because of that cap is spread across the other assets, again excluding goodwill. Depreciation for each asset is then recalculated.

So where a loss on a unit first wiped out its goodwill and then reduced other assets, only the part that reduced the other assets can come back. The new recoverable amount is usually based on a fresh value in use calculation.

Do the same rules apply to stock and debtors?

No. Inventories have their own rule in paragraph 27.4: the write down is reversed when the circumstances that caused it no longer exist, or there is clear evidence of a higher selling price, but only up to the original loss. Financial assets measured at cost or amortised cost, such as trade debtors and loans, fall under paragraph 11.26 instead of Section 27. A reversal there is required only where the decrease in the loss can be related objectively to an event after the impairment, such as an improvement in the debtor’s credit rating, and is capped at the carrying amount there would have been without the impairment. See impairment of trade debtors.

What is the tax effect of a reversal?

It depends on the asset. An impairment of a tangible fixed asset is a write down of capital cost that is not deductible in computing trading profits (BIM35030), so its reversal is equally ignored for tax and relief continues through capital allowances.

Intangible fixed assets within Part 8 of the Corporation Tax Act 2009 are different. Section 729 gives a tax debit for an impairment loss, and section 723 treats the restoration of past losses as a revaluation, giving a taxable credit limited to the net tax debits previously given on the asset. See intangible assets under FRS 102. For loans between connected companies, HMRC’s Corporate Finance Manual at CFM35310 explains that impairment debits are restricted and the corresponding credits on reversal are excluded.

What must be disclosed, and what goes wrong?

Paragraph 27.32(b) requires the amount of reversals recognised in profit or loss and the line items that include them, for each class of asset listed in paragraph 27.33, and paragraph 27.33A requires a description of the events and circumstances that led to the reversal. Common mistakes include:

  • reversing a goodwill impairment, or allocating a unit reversal to goodwill;
  • writing the asset back to its new recoverable amount without applying the depreciated cost cap;
  • failing to look for reversal indicators at all, so that assets stay understated;
  • reversing because of the unwinding of the discount alone; and
  • not recalculating depreciation after the reversal.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.