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IAS 36 — Recoverable amount and carrying amount of a cash-generating unit

Date recorded:


In November 2015, the Interpretations Committee published a tentative agenda decision not to add to its agenda a request to clarify the application of paragraph 78 of IAS 36 Impairment of Assets. The submitter questioned the approach set out in paragraph 78 of IAS 36, which requires an entity to deduct the carrying amount of the recognised liability in determining both the CGU’s carrying amount and its value in use (VIU). The submitter asked whether an alternative approach should be required. The Interpretations Committee tentatively decided not to include this issue on its agenda because when an entity cannot determine the recoverable amount of a CGU without consideration of a recognised liability, paragraph 78 of IAS 36 requires the entity to deduct the carrying amount of the recognised liability in determining both the CGU’s carrying amount and its VIU. In this case, the CGU’s fair value less costs of disposal is determined considering the assets of the CGU and the recognised liability together, consistently with the requirements in paragraph 29 of IAS 36.

The purpose of this session was to analyse the comments letters received and discuss the staff recommendation.

Comment letter analysis

The staff indicated that the majority of respondents agreed with the tentative agenda decision. However, there were some concerns noted that require clarifying that the reason for the adjustment should be in line with the reason provided in paragraph 78 of IAS 36, namely that an entity deducts the carrying amount of a recognised liability in determining both the CGU’s carrying amount and the CGU’s VIU when ‘the disposal of the cash-generating unit would require the buyer to assume the liability’.

Staff recommendation

The staff recommended the Interpretations Committee to finalise the agenda decisions with the consideration of wording changes.


The Interpretations Committee voted to finalise the agenda decision. No significant concerns were raised during the discussion.


There was some discussion about the alignment between the liabilities considered as part of the CGU and the carrying amount of the liability. For example, it was mentioned that the liability in the CGU would be discounted at the rate applicable to the impairment testing; on the other hand, the discount rate to be applied to a liability would be the one relevant for that particular liability. It was agreed to add some wording in the agenda decision to clarify that the amounts included in the CGU and the carrying amount should be comparable.

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