IFRS 16 and IAS 36. beta for the entity may increase (as a result of increased risk related to forecasts given increased uncertainty); and. Intangible assets – License impairment loss Impairment of intangible assets Impairment of intangible assets $61,28 million Under IFRS, the impairment, if any, is worked out by directly comparing the carrying amount with the higher of the fair value less cost to sell (which is zero in this case) to the value in use (which is $113.72 million). So how can the TMT industry ride out the turbulence and thrive? How is COVID-19 likely to impact the impairment test? Fair value is defined as an amount obtainable in an arm’s length transaction between knowledgeable and willing parties. Our selection is again driven by the degree of impairment intensity. GAAP takes a more conservative approach and prohibits reversals of impairment losses for all types of assets. Examples of intangible assets with a limited-life include copyrights and patents. We focus on disclosures relating to three classes of non-current non-financial assets: property, plant and equipment (PP&E), intangible assets other than goodwill (hereafter intangible assets) and goodwill. However, the accounting standards do require disclosure about material non-adjusting events after the balance sheet date, including an estimate of the financial effects when possible. .2 • Impairment testing of ... • Developments in IFRS . Some companies that have been applying IFRS 3 Business Combinations since 2009 say that the requirements in IAS 36 Impairment of Assets for testing impairment of goodwill are overly complex, time-consuming and expensive. • Do not change recognition of intangible assets separately from goodwill. IFRS requires the companies to assess the indications of the impairment annually by keeping an eye on the several indicators mentioned above. Any impairment loss of a revalued asset shall be treated as a revaluation decrease in accordance with that other Standard. Those with a 31 March 2020 reporting date and onwards will clearly need to consider COVID-19 as an impairment indicator for financial reporting purposes. European enforcers review of impairment of goodwill and other intangible assets in the IFRS financial statements. Preparers of financial statements will need to be agile and responsive as the situation unfolds. .7 • IFRS in Brief & IFRS Briefing Sheets - December 2004 - January 2005 ... intangible assets are the 'cost to recreate', 'income capitalisation' and 'market' approaches. Reference 2013/2 . Some acquirers might be motivated to report fewer intangibles, and higher goodwill, because most intangible assets must be amortised whereas goodwill is measured under an impairment only approach. Download impairment of intangible assets and goodwill [ 213 kb ]. So what’s the solution? Requirements for amortisation period and amortisation method are set out in paragraphs IAS 38.97-99 and generally are the same as in IAS 16. Certain intangible assets, such as goodwill, are tested for impairment on an annual basis. Unfortunately, many businesses will continue to be affected for some time. Many companies also find it difficult to identify sufficiently reliable and observable data for measuring specified intangible assets that should be recognised separately from … Long-lived assets are likely to be impacted. US GAAP and IFRS contain similar impairment indicators for assessing the impairment of long-lived assets (“non-current assets” in IFRS). The assets of the enterprise are tested for impairment each year and if impaired, it is recognized in the income statement and balance sheet accordingly. For other asset classes that fall under the standard, the entity is required to test the asset for impairment when indicators of impairment are present. Whichever approach is used management must ensure the outcome reflects the risks, uncertainties and other factors that would influence market participants’ pricing decisions. Cash Flow statement is not affected by impairment directly as there is no cash transaction taking place at the time of impairment. Cash flow projections must also relate to the asset in its current condition. Both ASPE (ASPE 3063) and IFRS (IAS 36) have clear guidance on how impairment should be assessed. Section IFRS Supervisory Convergence. Type Final Report. An impairment loss shall be recognized to profit or loss or as a revaluation decrease if the … BDO is continuously finding new ways to help your organization thrive. These assumptions should be explicit, clear and supportable. Impairment of Intangibles with Indefinite life. intangible assets, goodwill, property, plant, and equipment may not be recoverable. Our advice is to build a wider ‘digital risk’ function which integrates data privacy and cyber security. External indicators• Observable indicators of decrease in value• Significant changes with an adverse effect on the entity have taken place during the period in the economic environment in which the entity operates or in the market to which an asset is dedicated• The carrying amount of the net assets of the entity is more than its market capitalisation. Main document. IFRS 16 and IAS 36 how changes in lease accounting will impact your impairment testing processes. "A Study of Long-Lived Asset Impairment Under U.S. GAAP and IFRS Within the U.S. Institutional Environment," Page 7. IAS 36 seeks to ensure that the assets of a reporting entity are carried at amounts not in excess of their recoverable amounts. It’s clear that regulators around the world are wanting more disclosure than less on impairments stemming from the COVID-19 pandemic. (c) joint ventures, as defined in IFRS 11 Joint Arrangements. Main document. When estimating FVLCD reference should be made to observable, arm’s length transactions as far as possible. The current volatility in financial markets introduces additional challenges to this process as the parameters used to estimate discount rates become more unpredictable. detailed impairment-related disclosures in 2010-11. Unless it is tested on a standalone basis, an ROU asset is tested in combination with other assets in a Cash Generating Unit (CGU). As the situation develops, more information about the severity of the financial impact may become available after year-end but before the date of approval of the financial statements. GTIL and the member firms are not a worldwide partnership. The major points covered under this regulation are: 1. In normal times, the risk-adjusted discount rate approach is more typical. 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