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IASB amends IAS 36 regarding recoverable amount disclosures for nonfinancial assets

  • IASB (International Accounting Standards Board) Image

May 29, 2013

The IASB, as a consequential amendment to IFRS 13, "Fair Value Measurement," modified some of the disclosure requirements in IAS 36, "Impairment of Assets," regarding measurement of the recoverable amount of impaired assets. However, one of the amendments potentially resulted in the disclosure requirements being broader than originally intended. The IASB has rectified this through the issue of "Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)."

Exposure Draft ED/2013/1, Recoverable Amount Disclosures for Non-Financial Assets (Proposed amendments to IAS 36), was published on January 18, 2013. The amendments published today result from the proposals of the ED and the feedback received on it.

The amendments to IAS 36:

  • Remove the requirement to disclose the recoverable amount of each cash-generating unit (group of units) for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit (group of units) is significant when compared to the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives.
  • Require an entity to disclose the recoverable amount of an individual asset (including goodwill) or a cash-generating unit for which the entity has recognized or reversed an impairment loss during the reporting period.
  • Require an entity to disclose additional information about the fair value less costs of disposal of an individual asset, including goodwill, or a cash-generating unit for which the entity has recognized or reversed an impairment loss during the reporting period, including:
    • The level of the fair value hierarchy (from IFRS 13) within which the fair value measurement is categorized.
    • The valuation techniques used to measure fair value less costs of disposal.
    • Key assumptions used in the measurement of fair value measurements categorized within "Level 2" and "Level 3" of the fair value hierarchy.
  • Require an entity to disclose (1) the discount rate used, (2) where an entity has recognized or reversed an impairment loss during the reporting period, and (3) that the recoverable amount is based on fair value less costs of disposal determined using a present-value technique (this amendment originated in the 2010–2012 cycle of annual improvements in the exposure draft published in May 2012).

The overall effects of the amendments are (1) to reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, (2) to clarify the disclosures required, and (3) to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) when recoverable amount (that is based on fair value less costs of disposal) is determined using a present-value technique.

Overall constituent comments on the original proposals were supportive of the amendments. One notable change from the exposure draft is the removal of the proposed illustrative example, responding to constituent concern about its usefulness and the potential for confusion, and in light of existing examples in IFRS 13. Other constituent comments around inconsistencies in the use "costs to sell" and "costs of disposal" have been referred to the IFRS Interpretations Committee for possible consideration as an annual improvement.

The amendments apply on a retrospective basis for annual periods beginning on or after January 1, 2014. An entity may apply the amendments earlier to any period in which it also applies IFRS 13.

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