Impairment of Cash-generating Assets
Comments from ACCA
February 2007
The Association of Chartered Certified Accountants (ACCA) is pleased to have this opportunity to comment on Exposure Draft 30: Impairment of Cash-Generating Assets. These comments have been prepared in consultation with members of ACCA's Public Sector Network Panel, a group of experienced accountants working in the public sector.
ACCA agrees with the proposals and approach adopted in this exposure draft especially the presumption in paragraph 21 that, without clear evidence to the contrary, assets held by public sector entities are assumed to be non-cash-generating.
We would like to make the following points in terms of the specific matters for comment outlined in the exposure draft.
1. Assets that are carried at revalued amounts under the revaluation model in IPSAS 17, “Property, Plant and Equipment” should be excluded from the scope of this ED (see paragraphs 2 and 10 of the ED and paragraphs BC3-4 of the Basis for Conclusions). If you do not agree that assets carried at revalued amounts under the revaluation model in IPSAS 17 should be excluded from the scope please give your reasons.
We agree with this proposal.
2. There should not be detailed requirements or guidance relating to goodwill. Goodwill is within the scope of the ED, but the ED does not include the detailed requirements and guidance contained in IAS 36. If you think that there should be detailed requirements and guidance please give your reasons and suggest what those requirements and guidance should be.
We agree with this proposal.
3. The definition of cash-generating assets in paragraph 14, as assets “held with the primary objective of generating a commercial return” is appropriate. If you do not consider that the definition is appropriate what definition do you propose?
We agree with this proposal. It may be that the scope of the proposed standard would be clearer if the title was amended to “Impairment of Assets Held for a Commercial Return”.
4. The guidance on identifying cash-generating assets in paragraphs 16-21 is appropriate and clear. If you do not think that it is appropriate and clear please indicate how it should be modified.
We agree with this proposal, especially the presumption that assets will not be considered as cash generating unless there is clear evidence that this is the case.
5. If a non-cash-generating asset contributes to a cash-generating unit (CGU):
a. It should firstly be assessed for impairment under IPSAS 21; and
b. In accordance with paragraph 96, a proportion of the carrying amount of a non-cash-generating asset following the application of any impairment loss calculated under IPSAS 21 should be allocated to the carrying amount of any CGU to which it contributes.
If you do not think that this approach is appropriate please indicate how non-cash-generating assets that contribute to CGUs should be treated.
We agree with this proposal.
6. There is no need to include a definition of, and requirements and guidance related to, “corporate assets”. IAS 36 defines “corporate assets” as assets other than goodwill that contribute to more than one CGU (see paragraph BC11 of the Basis for Conclusions). If you disagree with this approach please give your reasons and outline what the requirements should be.
We agree with this proposal.