TMI BlogImpairment of AssetsX X X X Extracts X X X X X X X X Extracts X X X X ..... g from costs to obtain or fulfil a contract that are recognised 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 ; (h) deferred acquisition costs, and intangible assets, arising from an insurer s contractual rights under insurance contracts within the scope of Ind AS 104, Insurance Contracts ; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent of the cash inflows from other assets or groups of assets. Corporate assets are assets other than goodwill that contribute to the future cash flows of 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 valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make a formal estimate of recoverable amount if no indication of an impairment loss is present. 9 An entity shall assess at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, 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 suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying amount of the investment in the separate financial statements exceeds the carrying amounts in the consolidated financial statements of the investee s net assets, including associated goodwill; or (ii) the dividend exceeds the total comprehensive income of the subsidiary, joint venture or associate in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Measuring recoverable amount 18 This Standard defines recoverable amount as the higher of an asset s or cash generating unit s fair value less costs of disposal and its value in use. Paragraphs 19 57 set out the requirements for measuring recoverable amount. These requirements use the term an asset but apply equally to an individual asset 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial margin; and (c) based on an analysis of events that have occurred and circumstances that have changed since the most recent recoverable amount calculation, the likelihood that a current recoverable amount determination would be less than the asset s carrying amount is remote. Fair value less costs of disposal 25-27 [Refer Appendix 1] 28 Costs of disposal, 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate for subsequent years, unless an increasing rate can be justified. This growth rate shall not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used, unless a higher rate can be justified. 34 Management assesses the reasonableness of the assumptions on which its current cash flow projections are based 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y-to-day servicing of the asset as well as future overheads that can be attributed directly, or allocated on a reasonable and consistent basis, to the use of the asset. 42 When the carrying amount of an asset does not yet include all the cash outflows to be incurred before it is ready for use or sale, the estimate of future cash outflows includes an estimate of any further cash outflow that is expected to be incurred before the asset is ready 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... useful lives, the replacement of components with shorter lives is considered to be part of the day-to-day servicing of the asset when estimating the future cash flows generated by the asset. 50 Estimates of future cash flows shall not include: (a) cash inflows or outflows from financing activities; or (b) income tax receipts or payments. 51 Estimated future cash flows reflect assumptions that are consistent with the way the discount rate is determined. Otherwise, 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 estim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stors would require if they were to choose an investment that would generate cash flows of amounts, timing and risk profile equivalent to those that the entity expects to derive from the asset. This rate is estimated from the rate implicit in current market transactions for similar assets or from the weighted average cost of capital of a listed entity that has a single asset (or a portfolio of assets) similar in terms of service potential and risks to the asset under review. However, the discount rate(s) used to 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 good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng unit). 67 The recoverable amount of an individual asset cannot be determined if: (a) the asset s value in use cannot be estimated to be close to its fair value less costs of disposal (for example, when the future cash flows from continuing use of the asset cannot be estimated to be negligible); and (b) the asset does not generate cash inflows that are largely independent of those from other assets. In such cases, value in use and, therefore, recoverable amount, can be determined only for the asset s cash-generating unit. Example A mining 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cash-generating units that are affected by the internal transfer pricing. 71 Even if part or all of the output produced by an asset or a group of assets is used by other units of the entity (for example, products at an intermediate stage of a production process), this asset or group of assets forms a separate cash-generating unit if the entity could sell the output on an active market. This is because the asset or group of assets could generate cash inflows that would be largely independent of the cash inflows from other assets or groups of assets. In using information based on financial budgets/forecasts that relates to such a cashgenerating unit, or to any other asset or cash-generating unit affected by internal transfer 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, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the recoverable amount of a cash-generating unit. This may occur if the disposal of a cash-generating unit would require the buyer to assume the liability. In this case, the fair value less costs of disposal (or the estimated cash flow from ultimate disposal) of the cash-generating unit is the price to sell the assets of the cash generating unit and the liability together, less the costs of disposal. To perform a meaningful comparison between the carrying amount of the cash-generating unit and its recoverable amount, the carrying amount of the liability is deducted in determining both the cash-generating unit s value in use and its carrying amount. Example A company operates a mine in a country where legislation requires that the owner must restore 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the entity at which the goodwill is monitored for internal management purposes; and (b) not be larger than an operating segment as defined by paragraph 5 of Ind AS 108, Operating Segments, before aggregation. 81 Goodwill recognised in a business combination is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. Goodwill does not generate cash flows independently of other assets or groups of assets, and often contributes to the cash flows of multiple cash-generating units. Goodwill sometimes cannot be allocated on a non-arbitrary basis to individual cashgenerating units, but only to groups of cash-generating units. As a result, the lowest level within the entity at which the goodwill is monitored for internal management purposes sometimes 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 all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e values of the operation disposed of and the portion of the cash-generating unit retained, unless the entity can demonstrate that some other method better reflects the goodwill associated with the operation disposed of. Example An entity sells for ₹ 100 an operation that was part of a cash-generating unit to which goodwill has been allocated. The goodwill allocated to the unit cannot be identified or associated with an asset group at a level lower than that unit, except arbitrarily. The recoverable amount of the portion of the cash-generating unit retained is ₹ 300. Because the goodwill allocated to the cash-generating unit cannot be nonarbitrarily identified or associated with an asset group at a level lower than that unit, the goodwill associated with the operation disposed of is measured on the basis of the relative values of the operation disposed of and the portion of the 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 structu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the unit exceeds the recoverable amount of the unit, the entity shall recognise the impairment loss in accordance with paragraph 104. 91- 95 [Refer Appendix 1] Timing of impairment tests 96 The annual impairment test for a cash-generating unit to which goodwill has been allocated may be performed at any time during an annual period, provided the test is performed at the same time every year. Different cash generating units may be tested for impairment at different times. However, if some or all of the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. 97 If the assets constituting the cash-generating unit to which goodwill has been allocated are tested for impairment at the same time as the unit containing the goodwill, they shall be tested for impairment before the unit containing the goodwill. Similarly, if the cash-generating units constituting a group of cash-generating units to which goodwill has been allocated are tested for impairment at the same time as the group of units containing the goodwill, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate asset cannot be determined unless management has decided to dispose of the asset. As a consequence, if there is an indication that a corporate asset may be impaired, recoverable amount is determined for the cashgenerating unit or group of cash-generating units to which the corporate asset belongs, and is compared with the carrying amount of this cash-generating unit or group of cash-generating units. Any impairment loss is recognised in accordance with paragraph 104. 102 In testing a cash-generating unit for impairment, an entity shall identify all the corporate assets that relate to the cash-generating unit under review. If a portion of the carrying amount of a corporate asset: (a) can be allocated on a reasonable and consistent basis to that unit, the entity shall compare the carrying amount of the unit, including the portion of the carrying amount of the corporate asset allocated to the unit, with its recoverable amount. Any impairment loss shall be recognised in accordance with paragraph 104. (b) cannot be allocated on a reasonable and consistent basis to that unit, the entity shall: (i) compare the carrying amount of the unit, excluding the corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of an individual asset cannot be determined (see paragraph 67): (a) an impairment loss is recognised for the asset if its carrying amount is greater than the higher of its fair value less costs of disposal and the results of the allocation procedures described in paragraphs 104 and 105; and (b) no impairment loss is recognised for the asset if the related cash-generating unit is not impaired. This applies even if the asset s fair value less costs of disposal is less than its carrying amount. Example A machine has suffered physical damage but is still working, although not as well as before it was damaged. The machine s fair value less costs of disposal is less than its carrying amount. The machine does not generate independent cash inflows. The smallest identifiable group of assets that includes the machine and generates cash inflows that are largely independent of the cash inflows from other assets is the production line to which the machine belongs. The recoverable amount of the production line shows that the production line taken as a whole is not impaired. Assumption 1: budgets/forecasts approved by m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reporting period whether there is any indication that an impairment loss recognised in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset. 111 In assessing whether there is any indication that an impairment loss recognised in prior periods for an asset other than goodwill may no longer exist or may have decreased, an entity shall consider, as a minimum, the following indications: External sources of information (a) there are observable indications that the asset s value has increased significantly during the period. (b) significant changes with a favourable effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which the asset is dedicated. (c) market interest rates or other market rates of return on investments have decreased during the period, and those decreases are likely to affect the discount rate used in calculating the asset s value in use and increase the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on fair value less costs of disposal, a change in estimate of the components of fair value less costs of disposal. 116 An asset s value in use may become greater than the asset s carrying amount simply because the present value of future cash inflows increases as they become closer. However, the service potential of the asset has not increased. Therefore, an impairment loss is not reversed just because of the passage of time (sometimes called the unwinding of the discount), even if the recoverable amount of the asset becomes higher than its carrying amount. Reversing an impairment loss for an individual asset 117 The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. 118 Any increase in the carrying amount of an asset other than goodwill above the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years is a revaluation. In accounting f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cognition of internally generated goodwill. Any increase in the recoverable amount of goodwill in the periods following the recognition of an impairment loss for that goodwill is likely to be an increase in internally generated goodwill, rather than a reversal of the impairment loss recognised for the acquired goodwill. Disclosure 126 An entity shall disclose the following for each class of assets: (a) the amount of impairment losses recognised in profit or loss during the period and the line item(s) of the statement of profit and loss in which those impairment losses are included. (b) the amount of reversals of impairment losses recognised in profit or loss during the period and the line item(s) of the statement of profit and loss in which those impairment losses are reversed. (c) the amount of impairment losses on revalued assets recognised in other comprehensive income during the period. (d) the amount of reversals of impairment losses on revalued assets recognised in other comprehensive income during the period. 127 A class of assets is a grouping of assets of similar nature and use in an entity s operations. 128 The information req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Ind AS 113) within which the fair value measurement of the asset (cash-generating unit) is categorised in its entirety (without taking into account whether the costs of disposal are observable); (ii) for fair value measurements categorised within Level 2 and Level 3 of the fair value hierarchy, a description of the valuation technique(s) used to measure fair value less costs of disposal. If there has been a change in valuation technique, the entity shall disclose that change and the reason(s) for making it; and (iii) for fair value measurements categorised within Level 2 and Level 3 of the fair value hierarchy, each key assumption on which management has based its determination of fair value less costs of disposal. Key assumptions are those to which the asset s (cash- generating unit s) recoverable amount is most sensitive. The entity shall also disclose the discount rate(s) used in the current measurement and previous measurement if fair value less costs of disposal is measured using a present value technique. (g) if recoverable amount is value in use, the discount rate(s) used in the current estimate and previous estimate (if any) of value in use. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost recent budgets/forecasts. 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(s) assigned to each key assumption, whether those value(s) 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. (iii) the period over which management has projected cash flows based on financial budgets/forecasts approved by management and, when a period greater than five years is used for a cash-generating unit (group of units), an explanation of why that longer period is justified. (iv) the growth rate used to extrapolate cash flow projections beyond the period covered by the most recent budgets/forecasts, and the justification for using any growth rate that exceeds the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market to which the unit (group of units) is dedicated. (v) the discount rate(s) applied to the cash flow projections. (e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If some or all of the carrying amount of goodwill or intangible assets with indefinite useful lives is allocated across multiple cash-generating units (groups of units), and the amount so allocated to each unit (group of units) is not significant in comparison with the entity s total carrying amount of goodwill or intangible assets with indefinite useful lives, that fact shall be disclosed, together with the aggregate carrying amount of goodwill or intangible assets with indefinite useful lives allocated to those units (groups of units). In addition, if the recoverable amounts of any of those units (groups of units) are based on the same key assumption(s) and the aggregate carrying amount of goodwill or intangible assets with indefinite useful lives allocated to them is significant in comparison with the entity s total carrying amount of goodwill or intangible assets with indefinite useful lives, an entity shall disclose that fact, together with: (a) the aggregate carrying amount of goodwill allocated to those units (groups of units). (b) the aggregate carrying amount of intangible assets with indefinite useful lives allocated to those units (groups of units). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scope of this Standard and is accounted for in accordance with Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations . Appendix A Using present value techniques to measure value in use This appendix is an integral part of the Ind AS. It provides guidance on the use of present value techniques in measuring value in use . Although the guidance uses the term asset , it equally applies to a group of assets forming a cash-generating unit. The components of a present value measurement A1 The following elements together capture the economic differences between assets: (a) an estimate of the future cash flow, or in more complex cases, series of future cash flows the entity expects to derive from the asset; (b) expectations about possible variations in the amount or timing of those cash flows; (c) the time value of money, represented by the current market risk-free rate of interest; (d) the price for bearing the uncertainty inherent in the asset; and (e) other, sometimes unidentifiable, factors (such as illiquidity) that market participants would reflect in pricing the future cash flows the entity expects to derive from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a single discount rate convention can incorporate all the expectations about the future cash flows and the appropriate risk premium. Therefore, the traditional approach places most of the emphasis on selection of the discount rate. A5 In some circumstances, such as those in which comparable assets can be observed in the marketplace, a traditional approach is relatively easy to apply. For assets with contractual cash flows, it is consistent with the manner in which marketplace participants describe assets, as in a 12 per cent bond . A6 However, the traditional approach may not appropriately address some complex measurement problems, such as the measurement of non-financial assets for which no market for the item or a comparable item exists. A proper search for the rate commensurate with the risk requires analysis of at least two items-an asset that exists in the marketplace and has an observed interest rate and the asset being measured. The appropriate discount rate for the cash flows being measured must be inferred from the observable rate of interest in that other asset. To draw that inference, the characteristics of the other asset s cash flows must be similar to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.00% ₹ 255.48 Expected present value ₹ 892.36 A9 The expected present value of ₹ 892.36 differs from the traditional notion of a best estimate of ₹ 902.73 (the 60 per cent probability). A traditional present value computation applied to this example requires a decision about which of the possible timings of cash flows to use and, accordingly, would not reflect the probabilities of other timings. This is because the discount rate in a traditional present value computation cannot reflect uncertainties in timing. A10 The use of probabilities is an essential element of the expected cash flow approach. Some question whether assigning probabilities to highly subjective estimates suggests greater precision than, in fact, exists. However, the proper application of the traditional approach (as described in paragraph A6) requires the same estimates and subjectivity without providing the computational transparency of the expected cash flow approach. A11 Many estimates developed in current practice already incorporate the elements of expected cash flows informally. In addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred, expected cash flows may not produce a representationally faithful estimate of the expected cost. However, this Standard is concerned with measuring the recoverable amount of an asset. The recoverable amount of the asset in this example is not likely to be ₹ 10, even though that is the most likely cash flow. This is because a measurement of ₹ 10 does not incorporate the uncertainty of the cash flow in the measurement of the asset. Instead, the uncertain cash flow is presented as if it were a certain cash flow. No rational entity would sell an asset with these characteristics for ₹ 10. Discount rate A15 Whichever approach an entity adopts for measuring the value in use of an asset, interest rates used to discount cash flows should not reflect risks for which the estimated cash flows have been adjusted. Otherwise, the effect of some assumptions will be double-counted. A16 When an asset-specific rate is not directly available from the market, an entity uses surrogates to estimate the discount rate. The purpose is to estimate, as far as possible, a market assessment of: (a) the time value of money for the periods until the end of the asset s usef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Ind AS 103, the acquirer measures and recognises goodwill as of the acquisition date as the excess of (a) over (b) below: (a) the aggregate of: (i) the consideration transferred measured in accordance with Ind AS 103, which generally requires acquisition-date fair value; (ii) the amount of any non-controlling interest in the acquiree measured in accordance with Ind AS 103; and (iii) in a business combination achieved in stages, the acquisition-date fair value of the acquirer s previously held equity interest in the acquiree. (b) the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed measured in accordance with Ind AS 103. Allocation of goodwill C2 Paragraph 80 of this Standard requires goodwill acquired in a business combination to be allocated to each of the acquirer s cash-generating units, or groups of cash-generating units, expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units, or groups of units. It is possible that some of the synergies resulting from a business combination will be allocated to a cash-gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose parts that have a non-controlling interest, 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. C8 If an impairment loss attributable to a non-controlling interest relates to goodwill that is not recognised in the parent s consolidated financial statements (see paragraph C4), that impairment is not recognised as a goodwill impairment loss. In such cases, only the impairment loss relating to the goodwill that is allocated to the parent is recognised as a goodwill impairment loss. C9 [Refer Appendix 1] Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 36 and the corresponding International Accounting Standard (IAS) 36, Impairment of Assets, issued by the International Accounting Standards Board. Comparison with IAS 36, Impairment of Assets 1 Paragraph 2(f) is deleted in Ind AS 36 as Ind AS 40 requires cost model. To maintain consistency with IAS 36, this paragraph number has been retained. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owned cash-generating unit with goodwill. 4 [8. Paragraphs 138 to 140K related to effective date have not been included in Ind AS 36 as these are not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IAS 36, these paragraph numbers are retained in Ind AS 36.] ******************** Notes:- 1. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, (b) contract assets and assets arising from costs to obtain or fulfill a contract that are recognised in accordance with Ind AS 115, Revenue from Contracts with Customers ; 2. Substituted vide F. No. 01/01/2009-CL-V(Part VI) Dated 28-03-2018 , w.e.f. 1st day of April, 2018, before it was read as, 1 [ (b) assets arising from construction contracts (see Ind AS 11, Construction Contracts and Ind AS 18, Revenue ) ] 3. Inserted vide F. No. 01/01/2009-CL-V(Part VI) Dated 28-03-2018 , w.e.f. 1st day of April, 2018 4. Inserted vide F. No. 01/01/2009-CL-V(Part VI) Dated 28-03-2018 , w.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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