Global Standards for the world economy

Saturday 20 July 2019

Banner graphic

Project news

Project news


The Interpretations Committee tentatively decided not to take this issue into its agenda

 11 November 2015


The Interpretations Committee received a request to clarify the application of paragraph 78 of IAS 36 Impairment of Assets. This paragraph sets out the guidance for considering recognised liabilities for determining the recoverable amount of a cash-generating unit (CGU) within the context of an impairment test for a CGU.

The submitter observed that the approach set out in paragraph 78 of IAS 36 for making the CGU’s carrying amount comparable with its recoverable amount produces a null result, because the recognised liability is required to be deducted both from the CGU’s carrying amount and from its value in use (VIU). The submitter asked whether an alternative approach should be required.

The Interpretations Committee observed that when the CGU’s fair value less costs of disposal (FVLCD) considers a recognised liability, paragraph 78 requires adjusting both the CGU’s carrying amount and its VIU by the carrying amount of the liability. This makes the comparison of recoverable amount to carrying value meaningful.

The Interpretations Committee observed that the approach in paragraph 78 of IAS 36 for considering recognised liabilities provides a straightforward and cost-effective method to perform a meaningful comparison of the measures involved in impairment testing. Moreover, it observed that this approach is consistent with the requirement in IAS 36 to reflect the risks specific to the asset in the present value measurement of the assets in the CGU and the requirement in IAS 37 Provisions, Contingent Liabilities and Contingent Assets to reflect the risks specific to the liability in the present value calculation of the liability.

In the light of the existing IFRS requirements the Interpretations Committee determined that neither an Interpretation nor an amendment to a Standard was necessary and therefore [decided] not to add this issue to its agenda.


Related information