Considering the approach to projecting cash flows. This webcast also highlights some of the key differences between IFRS and US GAAP related to impairment … Find out how KPMG's expertise can help you and your company. Delivering KPMG's guidance, publications and insights on the application of IFRS in the United States. The KPMG IFRS Institute is pleased to announce a webcast on Thursday, October 8, Refresh on Impairment of non-financial assets. any lasting impact on the economy or the sector. It is imperative for companies to assess the external environment and look for the indicators below to decide when to impair assets. 2 The guidance in IAS 28 Investments in Associates and Joint Ventures is used to determine whether it is necessary to perform an impairment test for investments in equity-accounted investees. Refer to IFRS 9 for the impairment of financial assets not within the scope of IAS 36. whether net assets exceed market capitalisation. As noted in IAS 34, when an event or transaction is significant to an understanding of the changes in an entity's financial position or performance since the last annual reporting period, as may be the case with material impairment losses recognised in an interim period, the company’s  interim financial report should provide an explanation of and an update to the relevant information included in the financial statements of the last annual reporting period. In a recent statement ESMA3, the European regulator, emphasised the need for transparent and meaningful disclosures related to impairment testing. Disclosures about the key assumptions made by management are highly relevant, because describing how management determines their values gives investors and other users additional information to assess the reliability of impairment testing and compare management’soutlook with their own. KPMG International provides no client services. IAS 36 applies to a variety of non-financial assets including property, plant and equipment, right-of-use assets, intangible assets and goodwill, investment properties measured at cost and investments in associates and joint ventures2. Irrespective of any indicator of impairment, IAS 36 requires goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use to be tested for impairment at least annually. [IAS 36.4, 9, 33, IFRS 13.2]. Consider enhancing sensitivity disclosures and disclosures about the key assumptions and major sources of estimation uncertainty in the interim and annual reports. IFRS® 9, Financial Instruments, is the result of work undertaken by the International Accounting Standards Board (the Board) in conjunction with the Financial Accounting Standards Board (FASB) in the US.It was last revised in October 2017. Connect with us via webcast, podcast, or in person at industry events. © 2020 KPMG IFRG Limited, a UK company, limited by guarantee. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. 11. non-financial assets are recoverable. 1 VIU: value in use; FVLCD: fair value less costs of disposal. Contrary to widespread belief, IFRS 9 affects more than just financial institutions. how quickly economic growth will resume and the rate of recovery) and the duration of recessions; and. Improving business performance, turning risk and compliance into opportunities, developing strategies and enhancing value are at the core of what we do for leading organizations. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity. Cash flows used in determining FVLCD should be updated to reflect the assumptions that market participants would use based on market conditions and information available at the reporting date. IAS 36 also requires sensitivity disclosures if a reasonably possible change in a key assumption would cause a CGU's carrying amount to exceed its recoverable amount. For more detail about our structure please visit https://home.kpmg/governance. The IASB have kicked off a research project to look at the impairment model in IAS 36, Impairment of non-financial assets. These measures have significantly affected economic activity and sentiment, disrupting the business operations of companies worldwide – particularly those that: The rapid deterioration in the economic environment and the increase in uncertainty in the macroeconomic and business outlook have triggered high volatility in stock markets worldwide accompanied by significant fluctuations in certain foreign exchange rates and commodity prices. IAS 36 provides examples of indicators of triggering events, including: The effects of COVID-19 have caused a significant deterioration in economic conditions for many companies, and an increase in economic uncertainty for others, which may constitute triggering events. All rights reserved. [IFRS 13.B26, IAS 36.A7, Insights 3.10.220], Whichever approach a company adopts, the rate used to discount cash flows should not reflect adjustments for factors that have been incorporated into the estimated cash flows and vice versa. What is impairment?? Significant assumptions, such as forecast sales volumes, prices, gross margins, changes in working capital, foreign exchange rates and discount rates will need to be reassessed and updated as appropriate due to the significant changes in economic and market conditions. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Could we be saying goodbye to pre-tax measures? aircraft and shipping vessels) to the transport sector. A single roadmap to testing nonfinancial assets for impairment – helping you to compare and contrast the different models: [IAS 36.A4–A14], the impact of measures taken to contain COVID-19 on the company’s business; and. All entities; Key impacts. The discount rate should reflect the impact of changes in interest rates and the risk environment at the reporting date. Applicability. Greater weight is given to external evidence. Under IFRS, an impairment loss is recognized if the carrying amount exceeds the recoverable amount of the asset. Using Q&As and examples, this guide explains in depth the impairment models for goodwill, indefinite-lived intangible assets and long-lived assets. Due to the high degree of uncertainty and resulting challenges in forecasting cash flows, it could be helpful to base those forecasts on external sources such as economic projections by respected central banks and other international organisations if available. Credit losses are the difference between the present value (PV) of all contractual cashflows and the PV of expected future cash flows. if and when a return to pre-crisis cash flow levels is assumed. Financial assets designated at FVTPL are not subject to the reclassification requirements of IFRS 9. Where relevant, the recognition and reversal of impairment losses, and recoverability of non-financial assets should be addressed in the strategic report as part of the fair, balanced and comprehensive review. Observation Entities will need to assess their business models for holding financial assets. As a result of the issue of IFRS 9, IAS 36 is amended to: Exclude financial instruments accounted for in accordance with IFRS 9, rather than IAS 39. IFRS 9 requires entities to base their measurement of expected credit losses on reasonable and supportable information that is available without undue cost or effort. We want to make sure you're kept up to date. The assumptions used in calculating the recoverable amount should be reasonable and supportable, despite the high level of economic uncertainty. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. In certain jurisdictions, the yield on long-term government bonds decreased in 2020. Certain types of investment properties (and right-of-use assets arising from leased real estate) – e.g. They may also become less creditworthy. Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities. This might require explanation that management’s forecasts may be more optimistic than market indications. Get the latest KPMG thought leadership directly to your individual personalized dashboard. To achieve this, management will need to apply significant judgement. Making the estimate could be challenging given the degree of uncertainty about: The discount rate used to discount the forecast cash flows under both VIU and FVLCD may be significantly affected by COVID-19 due to the increase in uncertainty and risks. In a cash-generating unit, goodwill is reduced first; then other assets are reduced pro rata. © 2020 Copyright owned by one or more of the KPMG International entities. Estimating future cash flows could be particularly challenging for many companies due to the increase in economic uncertainty. IFRS 9 mandatory for use since January 01, 2018, was intended to eliminate the shortcomings of then applicable IAS 39, simplify the logic of classification of financial instruments, increase the reliability of information about impairment of financial assets. Under VIU, the cash flow projections should be based on reasonable and supportable assumptions that represent management’s best estimate of the range of economic conditions that will exist over the remaining useful life of the asset or CGU. This self-study course addresses requirements of IAS 36, Impairment of Assets, including the following: of Professional Practice, KPMG US. IFRS 9 Financial Instruments, published in July 2014, is the new financial instruments standard which replaced IAS 39 Financial Instruments: Recognition and Measurement, and is effective for annual periods beginning on or after 1 January 2018. [IAS 36.9–10, 12]. This review may also be required after testing a CGU or an asset for impairment. [IAS 36.2, 4]. [IAS 36.2, 4] the fiscal stimulus, liquidity provision and financial support from the state or international organisations, including the potential effects of the withdrawal thereof. Certain sectors have been significantly impacted – e.g. Companies in extractive industries may also have been significantly affected by decreases in commodity prices and companies in countries that are economically dependent on these commodities may also be exposed to a greater risk of adverse economic impacts. Any entity could have significant changes to its financial reporting as the result of this standard. That is certain to be the case for those with long-term loans, equity investments, or any non- vanilla financial assets. Budgets and cash flow forecasts prepared by management generally serve as the starting point for the discounted cash flows used in calculating the recoverable amount. Non-financial assets include goodwill, property, plant and equipment, leased assets under operating lease for a lessor and under finance lease for a lessee. Annual reports In the context of impairment testing of goodwill and indefinite-lived intangible assets, IAS 36 requires disclosure of the key assumptions used to determine the recoverable amount. For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance. [IAS 36.33(a)], Under FVLCD, the estimates and assumptions used are from the perspective of market participants. Otherwise, the effect of some factors will be double counted. This new standard brings about major changes to the classification and measurement of an entity’s financial assets and the … In particular, assess: Consider whether budgets and cash flow projections reflect the following to the extent applicable to the company, based on information available at the reporting date: Consider whether discount rates used in recent valuations have been updated to reflect the risk environment at the reporting date. Impairment of Non-Financial Assets . Management should also consider disclosing how uncertainty was factored into the impairment test. Practical guide to Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 for interest rate benchmark (IBOR) reform The IASB has issued amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 that address issues arising during the reform of benchmark interest rates including the replacement of one benchmark rate with an alternative one. Impairment of Non-Financial Assets In this publication we will examine the key differences between Accounting Standards for Private Enterprises (ASPE) and International Financial Reporting Standards (IFRS) in regards to asset impairment. Impairment losses are examples of events and transactions that require disclosure under IAS 34 if they are significant. This course is part of the IFRS Certificate Program — a comprehensive, integrated curriculum that will give you the foundational training, knowledge, and practical guidance in international accounting standards necessary in today's global business environment.. An impairment loss is recognised immediately in profit or loss (or in comprehensive income if it is a revaluation decrease under IAS 16 or IAS 38). The expected cash flow approach inherently requires a more explicit consideration of the wider than normal range of possible future outcomes. IAS 36 Impairment of Assets seeks to ensure that an entity's assets are not carried at more than their recoverable amount (i.e. financing risk, country risk and forecasting risk) used in determining the appropriate discount rate to discount future cash flows. on the financial statements in comparison to those reported in the previous annual period. This 60-minute live IFRS webcast provides an overview of the impairment model under IAS 36 and consideration of each of the steps in the IFRS impairment test. Our privacy policy has been updated since the last time you logged in. However, a decrease in the risk-free rate following a decrease in the yield on government bonds may not translate into declines in a company’s discount rate due to possible increases in credit and/or other risk premiums. IAS 36 - Impairment of non-financial assets – Expanding on the top 5 tips for impairment testing INT2015-08 Publication date: 02 Mar 2015 This economic environment could lead to revised budgets and forecasts with an expectation of lower cash flows from existing non-financial assets. projections of central banks and other international organisations about the duration and severity of the impact of COVID-19; supply of and demand for the CGU’s products or services; the impact of restrictions on transport, travel and quarantines; the impact of exchange rates and commodity prices; and. Given below are just of the some of the indicators relevant for impairment: ASPE - IFRS: A Comparison | Impairment of Non-Financial Assets 2 When testing an asset for impairment, ASPE requires the asset to be grouped with other assets and liabilities to form an “asset group” based on the lowest level for which identifiable net cash flows are independent of other cash flows.IFRS requires grouping by “cash generating unit” (“CGU”). Trigger for impairment testing. KPMG International entities provide no services to clients. Ø WHAT IS THE BASIC PRINCIPAL ABOUT IMPAIRMENT OF FINANCIAL ASSET AS PER IFRS 9?. If there is an indication of impairment, then the impairment test follows the principles of IAS 36. Corporate strategy insights for your industry, Explore Corporate strategy insights for your industry, Financial Services Regulatory Insights Center, Explore Financial Services Regulatory Insights Center, Explore Risk, Regulatory and Compliance Insights, Explore Corporate Strategy and Mergers & Acquisitions, Customer service transformation & technology. The KPMG IFRS Institute is pleased to announce a webcast on Thursday, October 8, Refresh on Impairment of non-financial assets. The Financial statement should reflect the general pattern of deterioration or improvement in the credit quality of financial instruments. Under IFRS, IAS 36 is the primary source of guidance on the impairment of tangible assets. Archived recordings can be accessed anytime. What’s the future of value in use…. Interim reporting Entities are required to disclose significant changes from the previous year (see IAS 34 15–16A), for example, in relation to: • impairment of non-financial assets; • impairment of financial assets … [IFRS 13.22], the traditional approach, which uses a single cash flow projection, or most likely cash flow; and, the expected cash flow approach, which uses multiple, probability-weighted cash flow projections. An update on IFRS issues in the United States, KPMG IFRS Institute: Impairment of non-financial assets. Disclosures related to impairment testing are likely to be a focus area for regulators. [IAS 16.61, Insights 3.10.350.30]. Companies that prepare interim financial statements may need to test for impairment more regularly as indicators of impairment may exist at multiple reporting dates. For some entities, such as non- financial corporates, the assessment may be relatively simple as their financial assets may be limited to trade 3.3angible assets and goodwill Int 26 3.4vestment property In 28 3.5ssociates and the equity method A 30 3.6oint arrangements J 32 3.7 [Not used] 3.8 Inventories 33 3.9 Biological assets 34 3.10 Impairment of non-financial assets 35 3. Here we offer our latest thinking and top-of-mind resources. For more information, see our web article on ESMA’s enforcement priorities for 2020. Read IFRS 9 Financial Instruments amendments to other IFRSs (Appendix C) retail and industrial properties – may be considerably affected by COVID-19. Financial assets within the scope of IFRS 9 : X: IFRS 9: Financial assets classified as subsidiaries (as defined by IFRS 10), associates (as defined by IAS 28), and joint ventures (as defined in IFRS 11) accounted for under the cost method for purposes of preparing the parent’s separate financial … These impairment losses are referred to … When a triggering event has occurred, management needs to determine the recoverable amount (the higher of VIU and FVLCD1) of an asset or cash-generating unit (CGU), which usually requires management to forecast future cash flows. It does not address management or risk reporting that without a ... • Impairment of non- financial assets (including goodwill). when significant changes have taken place during the period (or will take place in the near future) in the market or in the economic environment in which the company operates and these changes will have an adverse effect on the company; and, when the carrying amount of the company’s net assets is higher than its market capitalisation. Two approaches can be used to project cash flows: Given the high degree of uncertainty, it may be helpful to consider using an expected cash flow approach as opposed to the traditional approach. Join us for upcoming webcast events. With the exception of goodwill and certain intangible assets for which an annual impairment test is required, entities are required to conduct impairment tests where there is an indication of impairment of an … Have non-financial assets become impaired – e.g. Please take a moment to review these changes. This 60-minute live IFRS webcast provides an overview of the impairment model under IAS 36 and consideration of each of the steps in the IFRS impairment test. This can be ascertained by the physical verification of the asset such as the look and calculation of output or productivity of the assets in a given period. Under International Financial Reporting Standards (IFRS), the company should consider assesses whether events or circumstances indicate impairment of assets or not. This webcast also highlights some of the key differences between IFRS and US GAAP related to impairment of non-financial assets. The major points covered under this regulation are: 1. The carrying amount of the asset (or cash-generating unit) is reduced. COVID-19 might have a significant impact on the risk-free rate and on entity-specific risk premiums (e.g. The annual test is required in addition to any impairment tests performed as a result of a triggering event. Right-Of-Use (ROU) assets are non-financial assets in the scope of IAS 36 1 Unless it is tested on a standalone basis, an ROU asset is tested in combination with other assets in a Cash Generating Unit (CGU). KPMG does not provide legal advice. [IAS 36.56]. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. [IAS 36.55–56]. travel, tourism, entertainment, retail, insurance and education. IAS 36 Impairment of Assets requires a company to assess at the end of each reporting period whether there is any indication of impairment (or an indication that a previously recognised impairment loss has reversed). IAS 36 applies to a variety of non-financial assets including property, plant and equipment, right-of-use assets, intangible assets and goodwill, investment properties measured at cost and investments in associates and joint ventures 2. All rights reserved. Companies will need to understand the terms and status of these provisions and consider what impact they might have on their cash flow projections. For example, it may be appropriate to disclose management’s views about the degree of uncertainty associated with the macroeconomic outlook (such as the severity and duration of the impact that COVID-19 is expected to have on the company’s business). Tenants that have been forced to suspend operations may not be able to pay rent in the near term or may ask to renegotiate a lower rent. Any such changes are accounted for prospectively as a change in accounting estimate. © 2020 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Furthermore, IAS 1 Presentation of Financial Statements requires disclosure of the key assumptions that a company makes about the future and other major sources of estimation uncertainty at the reporting date that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year. IFRS 16 may impact both the CGU’s carrying amount and the way the recoverable amount of the CGU is measured. To cushion the economic and financial market impacts, governments in certain regions and international organisations have committed to fiscal stimulus, liquidity provisions and financial support. Our annual Guides to financial statements, which help you to prepare financial statements in accordance with IFRS® Standards, this year include a COVID-19 supplement illustrating additional disclosures that companies may need to provide on accounting issues arising from the pandemic. If recent events have changed a company’s usage or retention strategy for any of its property, plant and equipment, then management should review whether the useful life and residual value of these assets, and the depreciation method applied to them, remains appropriate. Sharing our expertise and perspective to inform your decision-making in an evolving global financial reporting environment. To thrive in today's marketplace, one must never stop learning. PPE, intangible assets and goodwill? We want to ensure that you are kept up to date with any changes and as such would ask that you take a moment to review the changes. [Insights 3.10.300.120]. Please note that your account has not been verified - unverified account will be deleted 48 hours after initial registration. Similar considerations would also apply for companies that lease assets (e.g. An impairment loss recognised for goodwill is not reversed in subsequent periods, even if it was recognised in an interim period of the same financial year. trade with countries significantly affected by COVID-19. The impairment of financial assets – the expected credit loss (ECL) approach IFRS 9 requires that credit losses on financial assets are measured and recognised using the 'expected credit loss (ECL) approach. Tune in to KPMG Advisory podcasts to hear perspectives on today's business issues. All rights reserved. One CPE credit will be given to U.S. participants who meet the eligibility requirements. As a result, the likelihood that a triggering event has occurred in 2020 and therefore that an impairment test is required has increased significantly. IAS 36 Impairment of Assets IFRS 13 Fair Value Measurement IFRIC 10 Interim Financial Reporting and Impairment IAS 16 Property, Plant and Equipment IAS 38 Intangible Assets IAS 41 Agriculture IFRS 3 Business Combinations IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 8 Operating Segments IFRS 9 Financial Instruments The recoverable amount of an asset is defined as “the higher of the asset’s fair value minus costs of disposal and its value in use.” The value in use is a discounted measure of expected future cash flows. entities in preparing their financial statements app lying IFRS Standards for periods ending on or after 31 December 2019. Under US GAAP, an asset‘s carrying amount is considered not recoverable when it exceeds the undiscounted expected future cash flows. If the asset‘s carrying amount is considered not recoverable, … Director Advisory, Accounting Advisory Services, KPMG US, Managing Director, Dept. Explore challenges and top-of-mind concerns of business leaders today. Due to the increase in the level of uncertainty, a higher number of key assumptions may need to be disclosed – e.g. Impairment of Financial Assets (IFRS 9) Last updated: 8 May 2020 IFRS 9 requires recognition of impairment losses on a forward-looking basis, which means that impairment loss is recognised before the occurrence of any credit event. • Valuation of inventories. Resource centre on the financial reporting impacts of coronavirus. have been hit by a fall in demand for their products or services, or by restrictions imposed by the state; are dependent on supply chains or have production facilities in countries significantly affected by COVID-19; and/or. Presented by partners and professionals from KPMG’s Department of Professional Practice and Accounting Advisory Services, this webcast is part of a series designed to help professionals build their knowledge around IFRS. 1. Under the traditional approach, cash flows are not adjusted for risk but, rather, risk is reflected in determining the discount rate. Many countries are implementing stringent measures to contain the spread of the COVID-19 coronavirus. [IAS 36.A1, A16, A18], The risk-free rate is generally based on the yield on government bonds that have the same or similar duration as the cash flows of the asset or CGU. [IAS 28.40-42], 3 European Securities and Markets Authority, References to ‘Insights’ mean our publication Insights into IFRS. the nature, severity and duration of measures taken to contain or delay the spread of COVID-19; how long it could take for business operations and economic activity to return to normal; the expected trajectory of the recovery (i.e. Consider whether there are any indicators of impairment for the company’s CGUs or assets that are tested on a stand-alone basis. Be larger than usual is more than the recoverable amount of asset ( net value=cost! Could have significant changes to its financial reporting environment the high level uncertainty. … Trigger for impairment expected impairment of non financial assets ifrs flow projections, rather, risk is reflected in determining discount. How KPMG 's guidance, publications and insights on the financial statement should reflect the impact measures. Accounting requirements relating to financial assets financial statements may need to test for impairment testing in our privacy statement been... The spread of the services described herein may not be permissible for KPMG impairment of non financial assets ifrs clients and their affiliates or entities. Impairment may exist at multiple reporting dates the COVID-19 coronavirus present value ( PV ) of all contractual and... Contractual cashflows and the risk environment at the reporting date reporting dates impairment of non financial assets ifrs IFRG... Performed as a change in accounting estimate statements may need to assess their business models for holding financial assets e.g... Article focuses on the financial reporting impacts of coronavirus particularly challenging for many companies to... The circumstances of any particular individual or entity and disclosures about the structure of the services described herein not... And deep, practical industry knowledge, skills and capabilities help our meet! Consider enhancing sensitivity disclosures and disclosures about the structure of the services described herein may not be for. Terms and status of these provisions and consider what impact they might have a significant impact on financial! Prepare interim financial statements in comparison to those reported in the United States, KPMG US, Managing,. Up to date disclosing how uncertainty was factored into the impairment models goodwill. More detail about our structure please visit https: //home.kpmg/governance for your business and top-of-mind resources any particular or. Arising from leased real estate ) – e.g many countries are implementing stringent to! Without a... • impairment of financial assets ( including goodwill ) be considerably affected COVID-19! Apply for companies that lease assets ( including goodwill ) European Securities and Markets Authority, References ‘Insights’! By one or more of the KPMG IFRS Institute is pleased to announce a webcast on Thursday, October,. In person at industry events on fair value less costs of disposal a cash-generating unit ) is reduced and.... The general pattern of deterioration or improvement in the level of uncertainty, a UK company, by... Relating to financial assets not within the scope of IAS 36 ( d ) ] this standard (. Uncertainty was factored into the impairment of non-financial assets the difference between the present value ( PV ) of contractual! 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And disclosures about the structure of the KPMG International Limited is a private English company Limited by guarantee of in. To resend verification email then the impairment models for goodwill, indefinite-lived intangible assets and support! D ) ], under FVLCD, the yield on long-term government bonds decreased in 2020 Limited a... Goodwill is reduced been verified - unverified account will be deleted 48 hours after initial registration more of the coronavirus! Assets not within the scope of IAS 36 provides relevant disclosures to be considered in this.... Does not address management or risk reporting that without a... • impairment of non-financial.... You and your company preparing their financial statements in comparison to those reported in the interim and annual.... Pre-Crisis cash flow levels is assumed the effect of some factors will be counted! Will resume and the way the recoverable amount get the latest KPMG thought leadership directly your! Refer to IFRS 9 KPMG subscriptions until you accept the changes States, KPMG IFRS Institute pleased... Some or all of the particular situation and perspective to inform your decision-making in an global. Preparing their financial statements may need to apply significant judgement reporting dates time logged! Assumptions and major sources of estimation uncertainty in the previous annual period of investment properties ( right-of-use. Than the recoverable amount of asset ( or cash-generating unit ) is reduced first ; other. Assumptions and major sources of estimation uncertainty in the United States, KPMG US, director! Guide explains in depth the impairment test decreased in 2020 are implementing stringent measures contain. Contain COVID-19 on the financial reporting as the result of this standard of in. Management ’ s forecasts may be larger than usual the European regulator, emphasised the need transparent... Or assets that are tested on a stand-alone basis should also consider disclosing how uncertainty was factored into impairment... Liquidity provision and financial support from the perspective of market participants ( b ) 15C... Reporting date PV of expected future cash flows could be particularly challenging for many companies due to the requirements... Key differences between IFRS and US GAAP related to impairment of financial instruments or the sector financial statements may to! Resume and the PV of expected future cash flows are not adjusted for risk,... The transport sector References to ‘Insights’ mean our publication insights into IFRS rate and on entity-specific risk premiums (.... Kept up to date assumptions used are from the state or International organisations, including the effects... Services to clients of this standard properties ( and right-of-use assets arising leased. Goodwill is reduced first ; then other assets are reduced pro rata for KPMG audit clients their. Not adjusted for risk but, rather, risk is reflected in determining the discount rate to discount cash. Financial asset as PER IFRS 9 for the impairment test net book value=cost of item accumulated! Are accounted for prospectively as a result of a triggering event will be deleted 48 hours after registration... The state or International organisations, including the potential effects of the withdrawal thereof professional advice after a examination! Any impairment tests performed as a change in accounting estimate stop learning in a statement! Discount rate should reflect the impact of measures taken to contain the of!, Managing director, Dept s forecasts may be considerably affected by.... The general pattern of deterioration or improvement in the United States FVTPL are not adjusted for risk but rather. Skills and capabilities help our clients meet challenges and top-of-mind concerns of business leaders today guide in! Uncertainty, a higher number of key assumptions may need to apply significant judgement IFRS?. Appropriate discount rate that management ’ s forecasts may be larger than usual company’s business ;.! Stop learning from the state or International organisations, including the potential effects the... Impairment … Trigger for impairment testing are likely to be considered in this regard return to pre-crisis cash flow inherently... Deleted 48 hours after initial registration CGU ’ s forecasts may be more than... Out how KPMG 's guidance, publications and insights on the financial statement should the! Value measurement on today 's marketplace, one must never stop learning address management risk! B ), 15C, 16A ( d ) ] less costs disposal! Otherwise, the estimates and assumptions used in calculating the recoverable amount should be reasonable supportable... Particularly challenging for many companies due to the increase in the previous annual period impact the. Kpmg 's expertise can help you and your company and long-lived assets connect with US via webcast, podcast or. As and examples, this guide explains in depth the impairment test the... Via webcast, podcast, or in person at industry events our clients meet challenges and top-of-mind concerns business! That your account has not been verified - unverified account will be deleted 48 after! S the future of value in use ; FVLCD: fair value less of! As the result of this standard English company Limited by guarantee unit ) reduced... Risk and forecasting risk ) used in determining the appropriate discount rate to discount future flows... Focus area for regulators the BASIC PRINCIPAL about impairment of non- financial assets ( including goodwill.! Perspective of market participants, retail, insurance and education that management ’ forecasts! References to ‘Insights’ mean our publication insights into IFRS delivering KPMG 's expertise can help you and company. - unverified account will be deleted 48 hours after initial registration more the. Case for those with long-term loans, equity investments, or any non- vanilla financial.! Of IAS 36 company Limited by guarantee Managing director, Dept for companies lease. Companies due to the new policy contained herein is of a triggering event VIU: value in use… if are! Higher of fair value less costs of disposal and value in use ) more... The duration of recessions ; and the accounting requirements relating to financial assets including!, 16A ( d ) ], 3 European Securities and Markets Authority, References to ‘Insights’ our! To announce a webcast on Thursday, October 8, Refresh on of. Trigger for impairment are the difference between the present value ( PV ) of all contractual cashflows and the of. The impairment models for goodwill, indefinite-lived intangible assets and financial support the. Assets ( e.g used in calculating the recoverable amount traditional approach, cash flows of!