Valuation of Machinery & Equipment under IAS 36 Impairment of Assets

Valtech Valuation is pleased to announce the successful completion of an impairment testing engagement on machinery and equipment related to electric vehicle (EV) technology. This project highlights Valtech’s capability in valuing next-generation industrial assets within rapidly evolving sectors, while maintaining strict compliance with international financial reporting standards.

The engagement incorporated both the market approach and a discounted cash flow (DCF) model at the cash-generating unit (CGU) level, ensuring a robust and defensible assessment of recoverable amount.

CGU Identification in Integrated EV Operations

EV machinery is typically part of interdependent production lines (e.g. battery assembly + testing + logistics).

IAS 36 requires grouping assets where:

  • Cash inflows are not independently identifiable

Illustrative guidance confirms that interlinked assets should be assessed together as a CGU.

Impairment Testing in High-Growth EV Sectors

Electric vehicle technology assets—such as battery production equipment, charging infrastructure machinery, and advanced manufacturing systems—present unique valuation challenges:

  • Rapid technological obsolescence risk
  • Limited availability of direct market comparables
  • Strong dependence on future demand projections and policy support

Under IAS 36 Impairment of Assets, entities are required to ensure that:

Assets are carried at no more than their recoverable amount, being the higher of fair value less costs of disposal and value in use

Valtech’s approach is designed to address the dynamic and forward-looking nature of EV-related assets while meeting these strict accounting requirements.

Market Approach – Calibrating Against Emerging Industry Benchmarks

Valtech Insight: In the EV sector, technology lifecycle is a key driver of value—even relatively new equipment may face accelerated depreciation if superseded by more efficient innovations.

DCF Model – Capturing Future Value of EV-Driven Cash Flows

Given that EV machinery often operates as part of an integrated production ecosystem, Valtech performed a CGU-level valuation using a discounted cash flow model.

IAS 36 defines a CGU as:

“the smallest identifiable group of assets that generates cash inflows that are largely independent”

The DCF model incorporated:

  • Forecasts reflecting EV adoption trends and capacity utilisation
  • Revenue projections linked to battery demand / charging infrastructure rollout
  • Discount rates capturing technology, market, and regulatory risks

Value in use represents the present value of future cash flows expected from the CGU.

About Valtech Valuation

Valtech Valuation is a leading advisory firm providing valuation, financial reporting support, and transaction advisory services across Asia-Pacific, serving listed companies, private equity, and innovative growth businesses.

Valtech’s broad service capabilities include impairment testing, financial modelling, and specialist asset valuation, supporting clients across evolving industries. Valtech combines these elements to deliver credible, compliant, and decision-useful valuations, enabling clients to navigate both accounting requirements and strategic transformation.