What it does
This instrument removes the specific reference to depreciated replacement cost (DRC) as a measure of value in use in AASB 136 Impairment of Assets for primarily non-cash-generating specialised assets held by not-for-profit entities, and clarifies that the recoverable amount of such assets is expected to be materially the same as fair value determined under AASB 13 Fair Value Measurement. The document explains the Board’s decision process, including stakeholder feedback and technical analysis, and records the AASB’s decision to proceed with amendments that (a) delete references to DRC as a value in use measure in AASB 136 and (b) add a paragraph (Aus5.1 in the proposals) clarifying that for primarily non-cash-generating specialised assets held for continuing use of their service capacity, disposal costs are typically negligible and fair value will usually determine recoverable amount (ED 269 proposals, paragraphs 1.1-1.3; Redeliberation, paragraph BC31).
Mechanically, after the change:
- For NFP entities holding specialised, primarily non-cash-generating assets for continuing use of service capacity, recoverable amount will be the higher of value in use and net fair value (the standard test), but in practice recoverable amount will usually be fair value because value in use is likely to be small or close to zero (ED 269 proposals, para 2).
- Entities that use the revaluation model under AASB 116 or AASB 138 and regularly revalue specialised assets to fair value will, by virtue of regular revaluation, not need to apply AASB 136 to those assets for impairment since carrying amounts are unlikely to be materially different from fair value (Redeliberation, para BC31).
- Entities using the cost model and encountering impairment indicators must determine recoverable amount using fair value, rather than an entity-specific DRC value-in-use calculation (ED 269 proposals, para 3 under "Cost model").