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TMI BlogImpairment of AssetsX X X X Extracts X X X X X X X X Extracts X X X X ..... gnised in accordance with Ind AS 115, Revenue from Contracts with Customers;] (c) deferred tax assets (see Ind AS 12, Income Taxes); (d) assets arising from employee benefits (see Ind AS 19, Employee Benefits); (e) financial assets that are within the scope of Ind AS 109, Financial Instruments; (f) [Refer Appendix 1]; (g) biological assets related to agricultural activity within the scope of Ind AS 41 Agriculture that are measured at fair value less costs to sell ; 5[(h) contracts within the scope of Ind AS 117, Insurance Contracts, that are assets and any assets for insurance acquisition cash flows as defined in Ind AS 117; and] (i) non-current assets (or disposal groups) classified as held for sale in accordance with Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations. 3 This Standard does not apply to inventories, assets arising from construction contracts, deferred tax assets, assets arising from employee benefits, or assets classified as held for sale (or included in a disposal group that is classified as held for sale) because Indian Accounting Standards applicable to these assets contain requirements for recognising and measuring th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f both the cash-generating unit under review and other cash-generating units. Costs of disposal are incremental costs directly attributable to the disposal of an asset or cash-generating unit, excluding finance costs and income tax expense. Depreciable amount is the cost of an asset, or other amount substituted for cost in the financial statements, less its residual value. Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.1 Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See Ind AS 113, Fair Value Measurement.) An impairment loss is the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use. Useful life is either: (a) the period of time over which an asset is expected to be used by the entity; or (b) the number of production or similar units expected to be obtained from the asset b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xists, the entity shall estimate the recoverable amount of the asset. 10 Irrespective of whether there is any indication of impairment, an entity shall also: (a) test an intangible asset with an indefinite useful life or an intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test may be performed at any time during an annual period, provided it is performed at the same time every year. Different intangible assets may be tested for impairment at different times. However, if such an intangible asset was initially recognised during the current annual period, that intangible asset shall be tested for impairment before the end of the current annual period. (b) test goodwill acquired in a business combination for impairment annually in accordance with paragraphs 80-99. 11 The ability of an intangible asset to generate sufficient future economic benefits to recover its carrying amount is usually subject to greater uncertainty before the asset is available for use than after it is available for use. Therefore, this Standard requires an entity to test for impairment, at least annually, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period the dividend is declared. 13 The list in paragraph 12 is not exhaustive. An entity may identify other indications that an asset may be impaired and these would also require the entity to determine the asset's recoverable amount or, in the case of goodwill, perform an impairment test in accordance with paragraphs 80-99. 14 Evidence from internal reporting that indicates that an asset may be impaired includes the existence of: (a) cash flows for acquiring the asset, or subsequent cash needs for operating or maintaining it, that are significantly higher than those originally budgeted; (b) actual net cash flows or operating profit or loss flowing from the asset that are significantly worse than those budgeted; (c) a significant decline in budgeted net cash flows or operating profit, or a significant increase in budgeted loss, flowing from the asset; or (d) operating losses or net cash outflows for the asset, when current period amounts are aggregated with budgeted amounts for the future. 15 As indicated in paragraph 10, this Standard requires an intangible asset with an indefinite useful life or not yet available for use and goodwill to be tested for impairment, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set or a cash-generating unit. 19 It is not always necessary to determine both an asset's fair value less costs of disposal and its value in use. If either of these amounts exceeds the asset's carrying amount, the asset is not impaired and it is not necessary to estimate the other amount. 20 It may be possible to measure fair value less costs of disposal, even if there is not a quoted price in an active market for an identical asset . However, sometimes it will not be possible to measure fair value less costs of disposal because there is no basis for making a reliable estimate of the price at which an orderly transaction to sell the asset would take place between market participants at the measurement date under current market conditions. In this case, the entity may use the asset's value in use as its recoverable amount. 21 If there is no reason to believe that an asset's value in use materially exceeds its fair value less costs of disposal, the asset's fair value less costs of disposal may be used as its recoverable amount. This will often be the case for an asset that is held for disposal. This is because the value in use of an asset held for disposal will consist mainly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sposal, other than those that have been recognised as liabilities, are deducted in measuring fair value less costs of disposal. Examples of such costs are legal costs, stamp duty and similar transaction taxes, costs of removing the asset, and direct incremental costs to bring an asset into condition for its sale. However, termination benefits (as defined in Ind AS 19) and costs associated with reducing or reorganising a business following the disposal of an asset are not direct incremental costs to dispose of the asset. 29 Sometimes, the disposal of an asset would require the buyer to assume a liability and only a single fair value less costs of disposal is available for both the asset and the liability. Paragraph 78 explains how to deal with such cases. Value in use 30 The following elements shall be reflected in the calculation of an asset's value in use: (a) an estimate of the future cash flows the entity expects to derive from the asset; (b) expectations about possible variations in the amount or timing of those future cash flows; (c) the time value of money, represented by the current market risk-free rate of interest; (d) the price for bearing the uncertaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased by examining the causes of differences between past cash flow projections and actual cash flows. Management shall ensure that the assumptions on which its current cash flow projections are based are consistent with past actual outcomes, provided the effects of subsequent events or circumstances that did not exist when those actual cash flows were generated make this appropriate. 35 Detailed, explicit and reliable financial budgets/forecasts of future cash flows for periods longer than five years are generally not available. For this reason, management's estimates of future cash flows are based on the most recent budgets/forecasts for a maximum of five years. Management may use cash flow projections based on financial budgets/forecasts over a period longer than five years if it is confident that these projections are reliable and it can demonstrate its ability, based on past experience, to forecast cash flows accurately over that longer period. 36 Cash flow projections until the end of an asset's useful life are estimated by extrapolating the cash flow projections based on the financial budgets/forecasts using a growth rate for subsequent years. This rate is steady or decli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady for use or sale. For example, this is the case for a building under construction or for a development project that is not yet completed. 43 To avoid double-counting, estimates of future cash flows do not include: (a) cash inflows from assets that generate cash inflows that are largely independent of the cash inflows from the asset under review (for example, financial assets such as receivables); and (b) cash outflows that relate to obligations that have been recognised as liabilities (for example, payables, pensions or provisions). 44 Future cash flows shall be estimated for the asset in its current condition. Estimates of future cash flows shall not include estimated future cash inflows or outflows that are expected to arise from: (a) a future restructuring to which an entity is not yet committed; or (b) improving or enhancing the asset's performance. 45 Because future cash flows are estimated for the asset in its current condition, value in use does not reflect: (a) future cash outflows or related cost savings (for example reductions in staff costs) or benefits that are expected to arise from a future restructuring to which an entity is not yet committed; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise, the effect of some assumptions will be counted twice or ignored. Because the time value of money is considered by discounting the estimated future cash flows, these cash flows exclude cash inflows or outflows from financing activities. Similarly, because the discount rate is determined on a pre-tax basis, future cash flows are also estimated on a pre-tax basis. 52 The estimate of net cash flows to be received (or paid) for the disposal of an asset at the end of its useful life shall be the amount that an entity expects to obtain from the disposal of the asset in an arm's length transaction between knowledgeable, willing parties, after deducting the estimated costs of disposal. 53 The estimate of net cash flows to be received (or paid) for the disposal of an asset at the end of its useful life is determined in a similar way to an asset's fair value less costs of disposal, except that, in estimating those net cash flows: (a) an entity uses prices prevailing at the date of the estimate for similar assets that have reached the end of their useful life and have operated under conditions similar to those in which the asset will be used. (b) the entity adjusts those prices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o measure an asset's value in use shall not reflect risks for which the future cash flow estimates have been adjusted. Otherwise, the effect of some assumptions will be double counted. 57 When an asset-specific rate is not directly available from the market, an entity uses surrogates to estimate the discount rate. Appendix A provides additional guidance on estimating the discount rate in such circumstances. Recognising and measuring an impairment loss 58 Paragraphs 59-64 set out the requirements for recognising and measuring impairment losses for an individual asset other than goodwill. Recognising and measuring impairment losses for cash-generating units and goodwill are dealt with in paragraphs 65-108. 59 If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. 60 An impairment loss shall be recognised immediately in profit or loss, unless the asset is carried at revalued amount in accordance with another Standard (for example, in accordance with the revaluation model in Ind AS 16). Any impairment loss of a revalued asset shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning entity owns a private railway to support its mining activities. The private railway could be sold only for scrap value and it does not generate cash inflows that are largely independent of the cash inflows from the other assets of the mine. It is not possible to estimate the recoverable amount of the private railway because its value in use cannot be determined and is probably different from scrap value. Therefore, the entity estimates the recoverable amount of the cash generating unit to which the private railway belongs, ie the mine as a whole. 68 As defined in paragraph 6, an asset's cash-generating unit is the smallest group of assets that includes the asset and generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Identification of an asset's cash-generating unit involves judgement. If recoverable amount cannot be determined for an individual asset, an entity identifies the lowest aggregation of assets that generate largely independent cash inflows. Example A bus company provides services under contract with a municipality that requires minimum service on each of five separate routes. Assets devoted to each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pricing, an entity adjusts this information if internal transfer prices do not reflect management's best estimate of future prices that could be achieved in arm's length transactions. 72 Cash-generating units shall be identified consistently from period to period for the same asset or types of assets, unless a change is justified. 73 If an entity determines that an asset belongs to a cash-generating unit different from that in previous periods, or that the types of assets aggregated for the asset's cash-generating unit have changed, paragraph 130 requires disclosures about the cash-generating unit, if an impairment loss is recognised or reversed for the cash generating unit. Recoverable amount and carrying amount of a cash-generating unit 74 The recoverable amount of a cash-generating unit is the higher of the cash generating unit's fair value less costs of disposal and its value in use. For the purpose of determining the recoverable amount of a cash-generating unit, any reference in paragraphs 19-57 to 'an asset' is read as a reference to 'a cash generating unit'. 75 The carrying amount of a cash-generating unit shall be determined on a basis consistent with the way th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the site on completion of its mining operations. The cost of restoration includes the replacement of the overburden, which must be removed before mining operations commence. A provision for the costs to replace the overburden was recognised as soon as the overburden was removed. The amount provided was recognised as part of the cost of the mine and is being depreciated over the mine's useful life. The carrying amount of the provision for restoration costs is ₹ 500, which is equal to the present value of the restoration costs. The entity is testing the mine for impairment. The cash-generating unit for the mine is the mine as a whole. The entity has received various offers to buy the mine at a price of around ₹ 800. This price reflects the fact that the buyer will assume the obligation to restore the overburden. Disposal costs for the mine are negligible. The value in use of the mine is approximately ₹ 1,200, excluding restoration costs. The carrying amount of the mine is ₹ 1,000. The cash-generating unit's fair value less costs of disposal is ₹ 800. This amount considers restoration costs that have already been provided for. As a consequence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imes comprises a number of cash-generating units to which the goodwill relates, but to which it cannot be allocated. References in paragraphs 83-99 and Appendix C to a cash-generating unit to which goodwill is allocated should be read as references also to a group of cash-generating units to which goodwill is allocated. 82 Applying the requirements in paragraph 80 results in goodwill being tested for impairment at a level that reflects the way an entity manages its operations and with which the goodwill would naturally be associated. Therefore, the development of additional reporting systems is typically not necessary. 83 A cash-generating unit to which goodwill is allocated for the purpose of impairment testing may not coincide with the level at which goodwill is allocated in accordance with Ind AS 21, The Effects of Changes in Foreign Exchange Rates, for the purpose of measuring foreign currency gains and losses. For example, if an entity is required by Ind AS 21 to allocate goodwill to relatively low levels for the purpose of measuring foreign currency gains and losses, it is not required to test the goodwill for impairment at that same level unless it also monitors the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit retained. Therefore, 25 per cent of the goodwill allocated to the cash generating unit is included in the carrying amount of the operation that is sold. 87 If an entity reorganises its reporting structure in a way that changes the composition of one or more cash-generating units to which goodwill has been allocated, the goodwill shall be reallocated to the units affected. This reallocation shall be performed using a relative value approach similar to that used when an entity disposes of an operation within a cash-generating unit, unless the entity can demonstrate that some other method better reflects the goodwill associated with the reorganised units. Example Goodwill had previously been allocated to cash-generating unit A. The goodwill allocated to A cannot be identified or associated with an asset group at a level lower than A, except arbitrarily. A is to be divided and integrated into three other cash-generating units, B, C and D. Because the goodwill allocated to A cannot be non-arbitrarily identified or associated with an asset group at a level lower than A, it is reallocated to units B, C and D on the basis of the relative values of the three portions of A bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een allocated are tested for impairment at the same time as the group of units containing the goodwill, the individual units shall be tested for impairment before the group of units containing the goodwill. 98 At the time of impairment testing a cash-generating unit to which goodwill has been allocated, there may be an indication of an impairment of an asset within the unit containing the goodwill. In such circumstances, the entity tests the asset for impairment first, and recognises any impairment loss for that asset before testing for impairment the cash-generating unit containing the goodwill. Similarly, there may be an indication of an impairment of a cash-generating unit within a group of units containing the goodwill. In such circumstances, the entity tests the cash generating unit for impairment first, and recognises any impairment loss for that unit, before testing for impairment the group of units to which the goodwill is allocated. 99 The most recent detailed calculation made in a preceding period of the recoverable amount of a cash-generating unit to which goodwill has been allocated may be used in the impairment test of that unit in the current period provided all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall: (i) compare the carrying amount of the unit, excluding the corporate asset, with its recoverable amount and recognise any impairment loss in accordance with paragraph 104; (ii) identify the smallest group of cash-generating units that includes the cash-generating unit under review and to which a portion of the carrying amount of the corporate asset can be allocated on a reasonable and consistent basis; and (iii) compare the carrying amount of that group of cash-generating units, including the portion of the carrying amount of the corporate asset allocated to that group of units, with the recoverable amount of the group of units. Any impairment loss shall be recognised in accordance with paragraph 104. 103 .[Refer Appendix 1] Impairment loss for a cash-generating unit 104 An impairment loss shall be recognised for a cash-generating unit (the smallest group of cash-generating units to which goodwill or a corporate asset has been allocated) if, and only if, the recoverable amount of the unit (group of units) is less than the carrying amount of the unit (group of units). The impairment loss shall be allocated to reduce the carrying amount of the assets of the unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of management to replace the machine. The recoverable amount of the machine alone cannot be estimated because the machine's value in use: (a) may differ from its fair value less costs of disposal; and (b) can be determined only for the cash-generating unit to which the machine belongs (the production line). The production line is not impaired. Therefore, no impairment loss is recognised for the machine. Nevertheless, the entity may need to reassess the depreciation period or the depreciation method for the machine. Perhaps a shorter depreciation period or a faster depreciation method is required to reflect the expected remaining useful life of the machine or the pattern in which economic benefits are expected to be consumed by the entity. Assumption 2: budgets/forecasts approved by management reflect a commitment of management to replace the machine and sell it in the near future. Cash flows from continuing use of the machine until its disposal are estimated to be negligible. The machine's value in use can be estimated to be close to its fair value less costs of disposal. Therefore, the recoverable amount of the machine can be determined and no consideration is give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1062 in the extent to which, or manner in which, the asset is used or is expected to be used. These changes include costs incurred during the period to improve or enhance the asset's performance or restructure the operation to which the asset belongs. (e) evidence is available from internal reporting that indicates that the economic performance of the asset is, or will be, better than expected. 112 Indications of a potential decrease in an impairment loss in paragraph 111 mainly mirror the indications of a potential impairment loss in paragraph 12. 113 If there is an indication that an impairment loss recognised for an asset other than goodwill may no longer exist or may have decreased, this may indicate that the remaining useful life, the depreciation (amortisation) method or the residual value may need to be reviewed and adjusted in accordance with the Indian Accounting Standard applicable to the asset, even if no impairment loss is reversed for the asset. 114 An impairment loss recognised in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in accordance with another Indian Accounting Standard (for example, the revaluation model in Ind AS 16). Any reversal of an impairment loss of a revalued asset shall be treated as a revaluation increase in accordance with that other Indian Accounting Standard. 120 A reversal of an impairment loss on a revalued asset is recognised in other comprehensive income and increases the revaluation surplus for that asset. However, to the extent that an impairment loss on the same revalued asset was previously recognised in profit or loss, a reversal of that impairment loss is also recognised in profit or loss. 121 After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the asset shall be adjusted in future periods to allocate the asset's revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life. Reversing an impairment loss for a cash-generating unit 122 A reversal of an impairment loss for a cash-generating unit shall be allocated to the assets of the unit, except for goodwill, pro rata with the carrying amounts of those assets. These increases in carrying amounts shall be treated as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in accordance with Ind AS 108, shall disclose the following for each reportable segment: (a) the amount of impairment losses recognised in profit or loss and in other comprehensive income during the period. (b) the amount of reversals of impairment losses recognised in profit or loss and in other comprehensive income during the period. 130 An entity shall disclose the following for an individual asset (including goodwill) or a cash-generating unit, for which an impairment loss has been recognised or reversed during the period: (a) the events and circumstances that led to the recognition or reversal of the impairment loss. (b) the amount of the impairment loss recognised or reversed. (c) for an individual asset: (i) the nature of the asset; and (ii) if the entity reports segment information in accordance with Ind AS 108, the reportable segment to which the asset belongs. (d) for a cash-generating unit: (i) a description of the cash-generating unit (such as whether it is a product line, a plant, a business operation, a geographical area, or a reportable segment as defined in Ind AS 108); (ii) the amount of the impairment loss recognised or revers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents and circumstances that led to the recognition of these impairment losses and reversals of impairment losses. 132 An entity is encouraged to disclose assumptions used to determine the recoverable amount of assets (cash-generating units) during the period. However, paragraph 134 requires an entity to disclose information about the estimates used to measure the recoverable amount of a cash-generating unit when goodwill or an intangible asset with an indefinite useful life is included in the carrying amount of that unit. 133 If, in accordance with paragraph 84, any portion of the goodwill acquired in a business combination during the period has not been allocated to a cash1067 generating unit (group of units) at the end of the reporting period, the amount of the unallocated goodwill shall be disclosed together with the reasons why that amount remains unallocated. Estimates used to measure recoverable amounts of cash generating units containing goodwill or intangible assets with indefinite useful lives 134 An entity shall disclose the information required by (a)-(f) for each cash-generating unit (group of units) for which the carrying amount of goodwill or intangible ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based its determination of fair value less costs of disposal. Key assumptions are those to which the unit's (group of units') recoverable amount is most sensitive. (ii) a description of management's approach to determining the value (or values) assigned to each key assumption, whether those values reflect past experience or, if appropriate, are consistent with external sources of information, and, if not, how and why they differ from past experience or external sources of information. (iiA) the level of the fair value hierarchy (see Ind AS 113 within which the fair value measurement is categorised in its entirety (without giving regard to the observability of 'costs of disposal'). (iiB) if there has been a change in valuation technique, the change and the reason(s) for making it. If fair value less costs of disposal is measured using discounted cash flow projections, an entity shall disclose the following information: (iii) the period over which management has projected cash flows. (iv) the growth rate used to extrapolate cash flow projections. (v) the discount rate(s) applied to the cash flow projections. (f) if a reasonably possible change in a key ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le amounts: (i) the amount by which the aggregate of the units' (groups of units') recoverable amounts exceeds the aggregate of their carrying amounts. (ii) the value(s) assigned to the key assumption(s). (iii) the amount by which the value(s) assigned to the key assumption(s) must change, after incorporating any consequential effects of the change on the other variables used to measure recoverable amount, in order for the aggregate of the units' (groups of units') recoverable amounts to be equal to the aggregate of their carrying amounts. 136 The most recent detailed calculation made in a preceding period of the recoverable amount of a cash-generating unit (group of units) may, in accordance with paragraph 24 or 99, be carried forward and used in the impairment test for that unit (group of units) in the current period provided specified criteria are met. When this is the case, the information for that unit (group of units) that is incorporated into the disclosures required by paragraphs 134 and 135 relate to the carried forward calculation of recoverable amount. 137 [Refer Appendix 1] 3[Transition provisions and effective date 138 * 139 * 140 * 140A * 140 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le variations in the amount or timing of future cash flows, the result should be to reflect the expected present value of the future cash flows, ie the weighted average of all possible outcomes. General principles A3 The techniques used to estimate future cash flows and interest rates will vary from one situation to another depending on the circumstances surrounding the asset in question. However, the following general principles govern any application of present value techniques in measuring assets: (a) interest rates used to discount cash flows should reflect assumptions that are consistent with those inherent in the estimated cash flows. Otherwise, the effect of some assumptions will be double-counted or ignored. For example, a discount rate of 12 per cent might be applied to contractual cash flows of a loan receivable. That rate reflects expectations about future defaults from loans with particular characteristics. That same 12 per cent rate should not be used to discount expected cash flows because those cash flows already reflect assumptions about future defaults. (b) estimated cash flows and discount rates should be free from both bias and factors unrelated to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xample, is one less liquid than the other?); and (e) evaluate whether both sets of cash flows are likely to behave (ie vary) in a similar fashion in changing economic conditions. Expected cash flow approach A7 The expected cash flow approach is, in some situations, a more effective measurement tool than the traditional approach. In developing a measurement, the expected cash flow approach uses all expectations about possible cash flows instead of the single most likely cash flow. For example, a cash flow might be ₹ 100, ₹ 200 or ₹ 300 with probabilities of 10 per cent, 60 per cent and 30 per cent, respectively. The expected cash flow is ₹ 220. The expected cash flow approach thus differs from the traditional approach by focusing on direct analysis of the cash flows in question and on more explicit statements of the assumptions used in the measurement. A8 The expected cash flow approach also allows use of present value techniques when the timing of cash flows is uncertain. For example, a cash flow of Rs.. 1,000 may be received in one year, two years or three years with probabilities of 10 per cent, 60 per cent and 30 per cent, respectively. The exampl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that limited information, the estimated expected cash flow is ₹ 140 [(50 × 0.10) + (250 × 0.30) + (100 × 0.60)]. In each case, the estimated expected cash flow is likely to provide a better estimate of value in use than the minimum, most likely or maximum amount taken alone. A12 The application of an expected cash flow approach is subject to a cost-benefit constraint. In some cases, an entity may have access to extensive data and may be able to develop many cash flow scenarios. In other cases, an entity may not be able to develop more than general statements about the variability of cash flows without incurring substantial cost. The entity needs to balance the cost of obtaining additional information against the additional reliability that information will bring to the measurement. A13 Some maintain that expected cash flow techniques are inappropriate for measuring a single item or an item with a limited number of possible outcomes. They offer an example of an asset with two possible outcomes: a 90 per cent probability that the cash flow will be ₹ 10 and a 10 per cent probability that the cash flow will be ₹ 1,000. They observe that the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate is independent of the entity's capital structure and the way the entity financed the purchase of the asset, because the future cash flows expected to arise from an asset do not depend on the way in which the entity financed the purchase of the asset. A20 Paragraph 55 requires the discount rate used to be a pre-tax rate. Therefore, when the basis used to estimate the discount rate is post-tax, that basis is adjusted to reflect a pre-tax rate. A21 An entity normally uses a single discount rate for the estimate of an asset's value in use. However, an entity uses separate discount rates for different future periods where value in use is sensitive to a difference in risks for different periods or to the term structure of interest rates. Appendix B References to matters contained in other Accounting Standards This Appendix is an integral part of the Ind AS. This appendix lists the appendices which are part of other Indian Accounting Standards and makes reference to Ind AS 36, Impairment of Assets. 1. Appendix A .Intangible Assets-Web site Costs contained in Ind AS 38, Intangible Assets. 2. Appendix A Changes in Existing Decommissioning, Restoration and Similar Lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss C5 Paragraph 104 requires any identified impairment loss to be allocated first to reduce the carrying amount of goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. C6 If a subsidiary, or part of a subsidiary, with a non-controlling interest is itself a cash-generating unit, the impairment loss is allocated between the parent and the non-controlling interest on the same basis as that on which profit or loss is allocated. C7 If a subsidiary, or part of a subsidiary, with a non-controlling interest is part of a larger cash-generating unit, goodwill impairment losses are allocated to the parts of the cash-generating unit that have a non-controlling interest and the parts that do not. The impairment losses should be allocated to the parts of the cashgenerating unit on the basis of: (a) to the extent that the impairment relates to goodwill in the cash-generating unit, the relative carrying values of the goodwill of the parts before the impairment; and (b) to the extent that the impairment relates to identifiable assets in the cash generating unit, the relative carrying values of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' in IAS 36. In order to maintain consistency with paragraph numbers of IAS 36, the paragraph numbers are retained in Ind AS 36. 6 Following references to Illustrative Examples which are not integral part of IAS 36 have not been included in Ind AS 36: (i) Reference to Example 5 of Illustrative Examples in paragraph 47 illustrating effects of a future restructuring on a value in use calculation (ii) Reference to Example 6 of Illustrative Examples in paragraph 48 (iii) Reference to Example 3 of Illustrative Examples in paragraph 64 (iv) Reference to Example 1 of Illustrative Examples in paragraph 69 giving examples of identification of a cash generating unit 7 Following paragraphs making references to Illustrative examples which are not integral part of IAS 36 have been deleted in Ind AS 36. The paragraph numbers have been retained in Ind AS 36 in order to maintain consistency with paragraph numbers of IAS 36: (i) paragraph 103 making reference to Example 8 of Illustrative Examples illustrating the application of requirements given regarding corporate assets (ii) paragraph 137 making reference to Example 9 of Illustrative Examples illustrating the disclosures required ..... X X X X Extracts X X X X X X X X Extracts X X X X
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