Narrowing of recoverable amount disclosures

The genesis of the proposed changes to the recoverable amount disclosures lies in the consequential amendments to IAS 36 Impairment of Assets made by IFRS 13 Fair Value Measurement.

This consequential amendment introduced the requirement to disclose the recoverable amount of each cash-generating unit (or units) to which a significant portion of the overall carrying amount of goodwill or intangible assets with indefinite useful lives has been allocated (in paragraph 134).  The requirement to disclose recoverable amount of any such cash generating units therefore applies whether or not an impairment loss has been recognised in respect of that unit in the current period.

The proposed amendments would remove this requirement for all cash-generating units, and instead require the disclosure of the determined recoverable amount only where an impairment loss was recognised during the reporting period.  This would be achieved by moving the requirement to paragraph 130 of IAS 36, which applies where an impairment loss has been recognised.

Clarification of disclosures where an asset is impaired

In addition to moving the requirement to disclose recoverable amount to paragraph 130 as noted above, the exposure draft proposes to amend and clarify the disclosures required when an asset is impaired and recoverable amount has been determined on the basis of the asset's fair value less costs of disposal.

The proposed amendments would retain the existing exemption from the disclosure requirements of IFRS 13, but would require the provision of the following information:

• the valuation techniques used and any changes in that valuation technique
• the level of the 'fair value hierarchy' (from IFRS 13) within which the fair value measurement of the asset has been determined
• for items in Levels 2 and 3 of the fair value hierarchy, key assumptions used in the measurement of fair value, including an explicit requirement to include the discount rate used if a present value technique has been used.

The explicit requirement to disclose the discount rate has already been proposed by the IASB in Exposure Draft ED/2012/1 Annual Improvements to IFRSs arising from the 2010-2012 cycle of annual improvements.  Because this requirement has already been exposed, the IASB is not requesting comment on this aspect, but will not proceed with the annual improvement amendment in favour of one combined amendment as proposed in the exposure draft.

The proposed changes to the disclosures above will align them with those required where an asset is impaired and recoverable amount has been determined on the basis of value in use.  This would complete the alignment of disclosures between value in use and fair vale less disposal costs, which originally began in the 2006-2008 cycle of annual improvements though the issue of Improvements to IFRSs in 2008.

The proposed amendments would apply retrospectively.

ED/2013/1 is open for comment until 19 March 2013.

Click for (links to IASB website):

• IASB press release
• ED/2013/1 Recoverable Amount Disclosures for Non-Financial Assets