Your document headline

PRACTICAL INSIGHT
Austrian Airlines disclosed in its accounts that it had recognized an impairment loss against its aircraft. The entity intended to dispose of its aircraft and had
valued them at their disposal proceeds. Subsequently the entity decided not to dispose of all of the aircraft, and the recoverable amounts were measured at
value-in-use. This resulted in a reversal of the impairment loss of €51 million.
A reversal of an impairment loss for a cash-generating unit shall be allocated to the assets of that unit on a pro rata basis. Any impairment loss that relates to
goodwill will not be reversed.
IAS 36 has been amended to clarify a perceived inconsistency in determining the upper limit of a cash-generating unit. Formerly, IAS 36 stipulated that a cashgenerating
unit should not be larger than “an operating segment in accordance with IFRS 8.” As IFRS 8 distinguishes between “operating” and “reportable” segments,
uncertainty existed as to whether IAS 36 refers to the operating segment before or after aggregation permitted by IFRS 8. The amendment clarified that a cashgenerating
unit shall not be larger than an operating segment according to IFRS 8, that is, before aggregation of operating segments to reportable segments.
The amendment is effective for annual periods beginning on or after January 1, 2010, with earlier application permitted. The amendment is adopted prospectively;
that means it has no effect on prior periods’ impairment tests.
Facts
CASE STUDY 14
An entity, X, has five operating segments (A, B, C, D, E) for which operating results are regularly reviewed by the chief operating decision maker.
Operating segments C and D are aggregated, as they meet all the aggregation criteria of IFRS 8. Segments B and E do not meet the quantitative threshold
of IFRS 8, but are aggregated, because they meet the majority of the aggregation criteria of IFRS 8.
Required
Discuss the application of IAS 36 to the above scenario.
Solution
X has only three reportable segments (A, B/E, C/D). For goodwill impairment test purposes, however, the cash-generating units (or groups of cashgenerating
units) cannot be larger than the five operating segments. Goodwill can therefore not be tested on the aggregated level of C/D and B/E.
For each class of asset an entity shall disclose
1. Impairment losses recognized in profit or loss
2. Impairment losses reversed in profit or loss
3. The line item in profit or loss in which the impairment losses are included
DISCLOSURE REQUIREMENTS
Additionally, any impairment losses recognized in other comprehensive income should be disclosed, including reversals of impairment losses.
Each segment should disclose these items for each reportable segment: impairment losses recognized and reversed in the period both in profit or loss and in other
comprehensive income.
If an individual impairment loss or reversal is material, then this information should be disclosed:
1. The events and circumstances leading to the impairment loss.
2. The amount of the loss.
3. If it relates to an individual asset, the nature of the asset and the segment to which it relates.
4. For a cash-generating unit, the description of the amount of the impairment loss or reversal, by class of asset and segment should be disclosed.
5. If the recoverable amount is fair value less costs to sell, the basis for determining fair value must be disclosed.
6. If the recoverable amount is the value-in-use, the discount rate should be disclosed.
If the impairment losses recognized or reversed are material in relation to the financial statements as a whole, the main classes of assets affected should be disclosed
and the main events and circumstances that lead to the recognition of those losses should be disclosed.
Detailed information about the estimates used to measure the recoverable amounts of the cash-generating units that contain goodwill or intangible assets with an
indefinite useful life should also be set out.
EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS