AASB 136 - Impairment of Assets - August 2015

The core concepts the document treats are depreciated replacement cost (DRC), current replacement cost (CRC), value in use, fair value, specialised assets, and the distinction between cash-generating and non-cash-generating assets in a not-for-profit (NFP) context.

DRC under the previous AASB 136 was defined as "the current replacement cost of an asset less, where applicable, accumulated depreciation calculated on the basis of such cost to reflect the already consumed or expired future economic benefits of the asset" (Background, para 2). Value in use for NFP entities was required in some circumstances to be measured as DRC where the asset’s future economic benefits were not primarily dependent on generating net cash inflows and the entity would replace those benefits if deprived of the asset (Background, para 2). AASB 13 introduced the cost approach and CRC, defined as the amount required currently to replace the service capacity of the asset, and treats fair value as an exit price (The AASB’s initial deliberations, para 1).

The document examines the conceptual difference between an entry price and an exit price. It explicitly notes that fair value under AASB 13 is an exit price and hence conceptually different from DRC as previously used as an entity-specific entry price for value in use. Despite that conceptual difference, the AASB found that for primarily non-cash-generating specialised assets that are rarely sold and held for their service capacity, CRC under AASB 13 and DRC under AASB 136 are unlikely to be materially different in practice because (a) the market is typically inactive and highest and best use is the current use, and (b) CRC under AASB 13 and DRC both incorporate obsolescence (The AASB’s initial deliberations, paras 1-3).

The document highlights how valuation techniques and inputs align across the two measures. It records that valuers commonly consider physical, functional and economic obsolescence when estimating both CRC (under AASB 13) and DRC (under AASB 136), and that both measures look at replacement or reproduction cost adjusted for obsolescence and overcapacity (Redeliberation, Clarifying CRC, paras 1-3). The AASB therefore concluded that DRC as a value in use measure should be removed from AASB 136 and recoverable amount determined as fair value (ED 269 proposals para 1).

Key practical distinctions are also set out. The document clarifies that disposal costs are incremental, normal costs directly attributable to disposal and do not include costs to change the asset into a different asset or enhance it for sale. Costs such as rezoning or decommissioning that change the nature of the asset are considered costs to create an enhanced asset and are not disposal costs of the target asset for calculation of net fair value (Redeliberation, Disposal costs associated with specialised assets, paras 1-3). The document refers to Illustrative Example 8 in IFRS 13 to illustrate this point (Redeliberation, para 2).

Finally, the AASB treats the change as a measure aimed at reducing unnecessary impairment testing cost for NFP entities holding specialised assets that are revalued frequently to fair value, while still requiring fair-value determinations for cost-model assets where impairment indicators exist (ED 269 proposals, Revaluation model and Cost model implications).

The amendments and related guidance are explicitly targeted at not-for-profit entities holding primarily non-cash-generating specialised assets that are held for continuing use of their service capacity. The AASB confirms that the proposed paragraph Aus5.1 applies only to such assets of NFP entities and not to assets of for-profit entities (Redeliberation, Impairment of revalued assets, para 1).

Affected parties include:

• Preparers in the public sector and other NFP entities holding specialized assets that are rarely sold. The AASB identifies public sector preparers as a key constituency and reports outreach responses indicating common valuation practice in that sector (The need to issue, para 4; Redeliberation paras).
• Auditors and valuers engaged to assess fair value or recoverable amounts, because the measurement basis shifts to fair value under AASB 13 for recoverable amount determinations of the covered assets (The need to issue, paras 4-6; Redeliberation, Clarifying CRC).
• Entities that apply the cost model under AASB 116 or AASB 138, because when impairment indicators arise they must determine recoverable amount at fair value, which may require new or more frequent valuations (ED 269 proposals, Cost model implications).
• Entities that apply the revaluation model under AASB 116/AASB 138 and regularly revalue specialised assets to fair value. For those entities the amendment reduces the need to separately apply AASB 136 to those assets because carrying amounts will be consistent with fair value under the revaluation model (ED 269 proposals, Revaluation model; Redeliberation, para 3 under Impairment of revalued assets).
• Valuation professionals and fiscal statisticians where national accounting or public finance frameworks impose different rules, for example entities governed by the ABS Government Finance Statistics (GFS) Manual, which may prohibit capitalisation of borrowing costs , an issue the AASB notes would need separate treatment (Redeliberation, para on capitalisation of borrowing costs).

Who pays and who decides. The primary economic cost burdens fall on NFP entities that do not regularly revalue specialised assets and therefore must commission fair-value determinations when impairment indicators arise. Valuation fees and the administrative burden of documenting highest and best use, adjustments for obsolescence and determination of disposal costs are borne by those entities (ED 269 proposals paras, Redeliberation on disposal costs). The AASB decides the change in the standard and the explanatory document sets out how preparers should treat the assets under existing AASB standards (Redeliberation, final para).

The document reports that some stakeholders are not materially impacted because market practice already results in DRC and CRC being treated interchangeably for these specialised assets, but it also records constituencies that asked for clarifications to avoid divergence or confusion on interpretation (The need to issue, paras 5-6; Redeliberation, Clarifying CRC).

The amendment changes the measurement duty for recoverable amount of primarily non-cash-generating specialised assets held by NFP entities. The key duties and consequential rights in practical terms, as described in the document, are:

Duties for preparers:

• Identify whether an asset is primarily non-cash-generating and specialised, and whether it is held for continuing use of its service capacity. The AASB confirms the new paragraph Aus5.1 will only apply to such assets of NFP entities (Redeliberation, Impairment of revalued assets, para 1).
• Where the revaluation model is applied and assets are regularly revalued to fair value, preparers will not need to apply the impairment model in AASB 136 to those revalued assets (ED 269 proposals, Revaluation model; Redeliberation, para 3).
• Where the cost model is used and indicators of impairment exist, preparers must determine recoverable amount as fair value in accordance with AASB 13, rather than using an entity-specific DRC value-in-use calculation (ED 269 proposals, Cost model).
• When assessing fair value, preparers must follow AASB 13’s cost approach for CRC, which requires consideration of replacement cost of remaining service capacity and adjustment for obsolescence, and to consider highest and best use, restrictions, and incremental disposal costs (The AASB’s initial deliberations, paras 1-3; Redeliberation, Clarifying CRC and Disposal costs paras).

Duties for auditors and valuers:

• Test management’s classification of assets as primarily non-cash-generating and specialised and evaluate the fair-value measurements performed in accordance with AASB 13. The Board records valuers’ role and common practice in deriving CRC/DRC (The need to issue, paras 4-6; Redeliberation, Clarifying CRC paras).
• Confirm whether disposal costs used in net fair value calculations are indeed normal incremental costs to dispose of the target asset, and not costs to enhance or convert the asset into another asset (Redeliberation, Disposal costs associated with specialised assets, paras 2-3).

Rights and interactions:

• Entities that regularly revalue assets to fair value have the right, under the revaluation model, to carry those assets at amounts not materially different from fair value; the AASB notes this renders separate application of AASB 136 redundant for those assets (ED 269 proposals, Revaluation model; Redeliberation, para 3).
• The document preserves the standard recoverable amount framework , recoverable amount remains the higher of value in use and net fair value , but it records that in practice the fair value leg will typically prevail for the described assets (ED 269 proposals para 2).

Additional procedural duties:

• Entities must document the basis for conclusions about highest and best use, and the treatment of disposal costs versus costs to enhance an asset for sale (Redeliberation, Disposal costs paras).
• Entities must apply AASB 101 and AASB 108 to reflect the amendments in presentation and accounting policy disclosures and to address comparative information (Redeliberation, final paras).

The document therefore shifts the practical measurement duty from an entity-specific DRC-based value-in-use assessment to fair-value determinations using the cost approach where applicable, and it places corresponding evidential and valuation duties on preparers and auditors.

The explanatory material itself does not create statutory penalties, nor does it prescribe enforcement mechanisms distinct from the existing regulatory and audit framework that applies to financial reporting standards. The document is a standards-setting record of the AASB’s deliberations and reasons for amending AASB 136 and clarifying the application of AASB 13. Enforcement therefore occurs through the existing channels that enforce compliance with Australian Accounting Standards: audit procedures, regulatory review by bodies that oversee financial statements of entities (for example, corporate regulators, public sector audit offices), and external review processes. The document explicitly refers to consistent application with AASB 101 Presentation of Financial Statements and AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, which govern disclosures and policy change implementation (Redeliberation, final para).

Practical enforcement mechanisms and consequences under the current regime, as reflected in the document:

• Auditors are expected to challenge valuation conclusions and to ensure compliance with the relevant Standards. The AASB’s analysis and confirmation that CRC and DRC are consistent in practice for these specialised assets (Redeliberation, Clarifying CRC) provides a basis for auditors to evaluate management’s valuation approaches and inputs.
• Regulators and public sector auditors will examine whether NFP entities applying the cost model are determining recoverable amount using fair value under AASB 13 when impairment indicators exist, and whether revalued assets recorded under the revaluation model have been treated consistently so as to render separate application of AASB 136 unnecessary (ED 269 proposals, Revaluation model and Cost model).
• Non-compliance would manifest as departures from Australian Accounting Standards and therefore could form the basis for audit qualifications, regulatory findings, or directions by public sector audit offices. The explanatory document does not change the nature of those consequences but changes the applicable measurement and disclosure requirements for impacted assets.

The document flags areas that pose enforcement challenges:

• Distinguishing disposal costs from costs to enhance an asset and determining whether disposal costs are negligible in a particular case requires judgement and may be a focus for audit challenge (Redeliberation, Disposal costs paras).
• Assessing highest and best use and whether a market participant buyer would step into the shoes of the entity involves valuation assumptions that may attract scrutiny and difference of opinion between preparer and auditor (The AASB’s initial deliberations, Example and quote from AASB 13 para B9).

The AASB also notes practical constraints such as national accounting practice (for example ABS GFS Manual prohibitions on capitalising borrowing costs) that may affect valuation inputs and therefore the enforceability of uniform measurement practice; it records that such matters may need to be addressed in separate projects (Redeliberation, para on capitalisation of borrowing costs). Enforcement therefore remains embedded in the routine standards compliance and audit oversight framework, while the amendment shifts what auditors and regulators will scrutinise in impairment assessments for the defined class of assets.

The document explicitly maps the amendment to existing accounting standards and public sector practice, and clarifies interactions rather than creating standalone legal obligations. Primary standards referenced and their interaction are:

• AASB 13 Fair Value Measurement: The amendment directs reliance on fair value determined under AASB 13 when determining recoverable amount for primarily non-cash-generating specialised assets. The Board treats CRC under AASB 13 as equivalent in practice to DRC under the old AASB 136 provisions, and relies on AASB 13’s cost approach and definitions (The need to issue, paras 1-3; The AASB’s initial deliberations, paras 1-3; Redeliberation, Clarifying CRC paras).
• AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets: The document notes that DRC was previously mentioned in AASB 116 as a measure of fair value for specialised assets when there is no market-based evidence and the asset is rarely sold (Background, para 3). With AASB 13 in place and the re-definition of recoverable amount practice, DRC’s role in AASB 116 is considered no longer applicable for fair value measurement (The AASB’s initial deliberations, para 3).
• AASB 136 Impairment of Assets: The change is made to AASB 136 itself by deleting DRC as a value-in-use measure and adding a clarifying paragraph (ED 269 proposals paras 1-2). The standard’s recoverable amount test (higher of value in use and net fair value) remains, but the document records that fair value will usually determine recoverable amount for the assets in scope (ED 269 proposals para 2).
• AASB 5 Non-current Assets Held for Sale and Discontinued Operations: The AASB notes that assets held with the intention to sell are outside AASB 136 because AASB 5 applies to those assets (Redeliberation, para 4 under Impairment of revalued assets).
• AASB 101 and AASB 108: The Board notes these presentation and accounting policy standards apply when implementing the amendments, including treatment of comparative information and disclosure of changes in accounting policies (Redeliberation, para 6).
• ABS Government Finance Statistics Manual and public sector accounting rules: The AASB notes interactional issues, including that some public sector entities do not capitalise borrowing costs under ABS GFS rules, which may affect replacement cost inputs and requires separate consideration (Redeliberation, para under Clarifying CRC referring to capitalisation of borrowing costs).
• IFRS commentary and Basis for Conclusions references: The AASB relies on aspects of IFRS 13 Basis for Conclusions, specifically BC78 which addresses concerns that exit prices could be based on scrap values for specialised assets. The Board references that material as supporting its view that a market participant buyer would step into the shoes of the entity holding the specialised asset (The AASB’s initial deliberations, Example quoting paragraph B9 of AASB 13 and BC78).

The document emphasises practical boundaries. For example, costs to change an asset’s nature (such as rezoning) are not disposal costs of the target asset and therefore do not reduce net fair value of the current asset; instead those costs relate to valuation of an enhanced asset under a hypothetical highest and best use (Redeliberation, Disposal costs paras 2-3). That distinction has implications for tax, planning approvals and land-use regulation in practice, because rezoning costs are not treated as disposal costs for net fair value calculations, but the document only records the accounting treatment and not regulatory consequences outside accounting.

The amendment leaves intact obligations under other legislation and standards that govern public sector financial reporting, auditing, and budgetary processes. It does not purport to override statutory requirements for valuation or disposal procedures imposed by other laws, rather it frames how those inputs are to be used in financial reporting under AASB standards.

The document records the development that led to the amendment and the AASB’s decision to proceed. Key historical steps documented are:

• Background context: AASB 136 (July 2004 and August 2015) had contained Aus paragraphs requiring NFP entities to use DRC for value in use in particular circumstances, and DRC had been defined in AASB 136 (Background, paras 1-3).
• Identification of need: After publication of AASB 13 and its exposition of the cost approach (CRC), stakeholders sought clarification about the interaction between DRC in AASB 136 and CRC in AASB 13. Some commentators argued that DRC should not be an entity-specific measure of recoverable amount under AASB 136 but rather that CRC under AASB 13 should be used to determine fair value and therefore recoverable amount (The need to issue, paras 1-3).
• Outreach and consultation: AASB conducted targeted outreach with preparers, auditors, and valuers, particularly in the public sector, to gather views on practice and the interchangeability of CRC and DRC in practice. Feedback indicated separate evaluations were not usually performed and practical outcomes were often the same because highest and best use typically equals current use for specialised assets (The need to issue, paras 4-5).
• ED 269: The AASB published ED 269 Recoverable Amount of Non-cash-generating Specialised Assets of Not-for-Profit Entities proposing deletion of DRC references from AASB 136 and insertion of a paragraph (Aus5.1) to clarify that recoverable amount for primarily non-cash-generating specialised assets held for continuing use is expected to be materially the same as fair value under AASB 13 (ED 269 proposals paras 1-1.2). The ED set out implications for entities using revaluation and cost models (ED 269 proposals paras under Revaluation model and Cost model).
• Redeliberation: After receiving submissions and performing further outreach, the AASB redeliberated the proposals, addressing concerns such as the interpretation of CRC, disposal costs, and whether the amendment applied only to NFP entities. The Board confirmed that CRC is replacement cost of remaining service capacity, not gross cost of a new asset, and that DRC under AASB 136 is equivalent to CRC under AASB 13 in practice for specialised assets (Redeliberation, Clarifying CRC paras 1-3). The AASB also clarified disposal-cost boundaries and confirmed the amendment applies only to NFP entities (Redeliberation, Disposal costs and Impairment of revalued assets paras).
• Final decision: The AASB decided to proceed with the ED 269 proposals with amendments informed by the redeliberation and noted the applicability of AASB 101 and AASB 108 for implementing the amendments and comparatives. The Board stated it did not expect the amendments to change current practice materially (Redeliberation, para 6).

The document cites the original standards dates where relevant: AASB 136 (July 2004 and August 2015) and AASB 116 (July 2004). It also connects the amendment to the publication of AASB 13 and relevant paragraphs therein (The need to issue, paras 1-3; The AASB’s initial deliberations, paras 1-3). The amendment history as recorded is process-oriented: identification of a conceptual and practical issue, exposure draft, consultation and outreach, redeliberation to clarify technical points, and a decision to proceed.

The material does not provide dates for the ED publication or the final amendment beyond naming AASB 2016-4 in the header context, but the narrative records the sequence and the Board’s reasons for proceeding. The AASB also records follow-up items not covered by the amendment,such as the capitalisation of borrowing costs in the public sector context,which it leaves to separate projects (Redeliberation, paragraph on borrowing costs).

The explanatory document does not cite any litigation, judicial decisions, or court treatment of the issues addressed. No cases are named in the text and there is no record in this document of disputes decided by courts concerning the use of DRC under AASB 136 or CRC under AASB 13 (the document is an AASB policy and standards explanation, not a case law digest). Consequently, the material provides no direct litigation precedent or judicial interpretation to rely on.

Despite the absence of cited litigation, the document identifies factual and judgmental areas where disputes between preparers, auditors, valuers and possibly third-party stakeholders could arise if practice differs. These areas include:

• Whether a market participant buyer would be considered able to step into the shoes of the entity and therefore to self-construct at the same cost as the entity, as illustrated in the example where a facility could be constructed by the entity for $8.5 million but would cost $10 million for other market participants. The document quotes AASB 13 paragraph B9 and IFRS 13 BC78 to support the reasoning that a market participant buyer can be regarded as capable of self-constructing the asset, meaning CRC would be measured at $8.5 million in that example (The AASB’s initial deliberations, Example and quotation).
• The treatment of disposal costs and whether certain costs should reduce net fair value when determining recoverable amount. The redeliberation section notes stakeholders’ concerns that costs such as rezoning might be material and clarifies that costs to change the nature of an asset (for example, creating a vacant site from developed land) are not disposal costs of the target asset but costs to enhance an alternative asset for sale (Redeliberation, Disposal costs paras 1-3). Disagreement on this point could generate audit disputes or, in extreme cases, legal challenges if material misstatement allegations arise.
• The classification of assets as primarily non-cash-generating and specialised may be contested where an asset’s use or marketability is ambiguous. The document does not provide judicial resolution of such questions but it does flag them as matters of judgment that require documentation and valuation evidence (Background and ED 269 proposals sections).

Where disputes arise, they would be resolved through the normal routes , audit review, regulator inquiry, administrative appeal if relevant, or judicial determination in the event of litigation , but the document itself does not record any such proceedings or precedents. It therefore leaves open the possibility that future litigation might test the practical boundaries the AASB has articulated, particularly on valuation inputs, disposal costs and highest and best use conclusions.

The explanatory material identifies multiple practical pitfalls and judgement-sensitive areas that preparers and auditors must watch. The document flags potential misunderstandings, implementation traps, and areas where cost versus benefit trade-offs are material.

1. CRC versus DRC confusion. Some stakeholders continue to interpret CRC under AASB 13 as the gross replacement cost of a new asset rather than replacement cost of the remaining service capacity. The AASB emphasises that AASB 13 paragraph B8 describes CRC as the amount required to replace the service capacity of an asset and paragraph B9 clarifies that the market participant buyer consideration includes adjustment for obsolescence (Redeliberation, Clarifying CRC paras 1-3). Failure to recognise CRC as replacement cost of remaining service capacity may lead to inflated valuations and misstated recoverable amounts.

2. Conceptual entry-price versus exit-price tension. AASB 13 defines fair value as an exit price while the concept of DRC under AASB 136 had been more of an entry-price concept. Although the AASB concludes they are unlikely to be materially different for the assets in scope, the conceptual tension remains and could lead to inconsistency in practice if practitioners revert to entry-price thinking when applying AASB 13 (The AASB’s initial deliberations, paras 1-2).

3. Disposal costs boundary. The Board clarifies disposal costs are the normal incremental costs directly attributable to disposal and do not include costs to enhance or convert an asset to make it saleable. Practitioners sometimes mistake rezoning, decommissioning or conversion costs as disposal costs, but the AASB stresses these are costs to an enhanced asset and should be considered when valuing a different asset, not when calculating net fair value of the target asset (Redeliberation, Disposal costs paras 1-3). Misclassifying such costs can materially affect net fair value.

4. Public sector practice differences. The ABS GFS Manual prohibition on capitalisation of borrowing costs in some public sector contexts may influence replacement cost inputs. The AASB acknowledged that capitalisation assumptions used in illustrative examples may not be common practice in public sector entities and noted this needs separate attention (Redeliberation, para on capitalisation of borrowing costs). Using inappropriate capitalisation assumptions may cause divergence between financial reporting and fiscal statistics.

5. Revaluation model interaction. Entities that regularly revalue specialised assets to fair value may no longer need to apply AASB 136 to those assets, because carrying amounts are not materially different from fair value. The “gotcha” is that entities must actually perform regular revaluations to the standard required; failing to revalue regularly but treating the impairment requirement as redundant would be a misapplication (ED 269 proposals, Revaluation model; Redeliberation, para 3).

6. Highest and best use judgement. The AASB notes that highest and best use requires considering reasonably possible uses, not every conceivable use. However, misapplying this principle to assert an alternative highest and best use without evidence could materially alter fair-value conclusions and invite audit challenge (The need to issue, para 5).

7. Valuation practice and availability of market inputs. For specialised assets in inactive markets, valuers must rely on cost approaches and assumptions. Differences in valuation technique, obsolescence adjustment, or assumptions about a market participant’s abilities can generate materially different outcomes. The Board records valuers’ views that market participants may be assumed to have the same construction capability as the entity in some industries, but this assumption must be evidenced (The need to issue, para 6; The AASB’s initial deliberations example).

8. Classification errors. Misclassifying an asset as non-cash-generating when it is cash-generating, or vice versa, has immediate measurement consequences because value in use under AASB 136 differs between those classes. The document does not provide a checklist, so entities must exercise careful judgement.

9. Disclosure and policy change. Because the amendment changes measurement practice, entities must conform to AASB 101 and AASB 108 when applying the change, including disclosing accounting policy changes and comparative impacts. Failure to apply the disclosure standards correctly can lead to non-compliance findings (Redeliberation, para 6).

10. Implementation cost for cost-model entities. Entities that previously relied on an internal DRC-based value-in-use calculation may now need external valuations of fair value under AASB 13 when impairment indicators arise. This can increase valuation cost and administrative burden, particularly for smaller NFPs that do not revalue regularly (ED 269 proposals, Cost model).

In short, the main practical pitfalls are conceptual misreadings of CRC, misclassification of disposal costs, inconsistent revaluation practice, and valuation-assumption disputes. The AASB’s redeliberation addresses many of these points, but the document signals that careful documentation and adherence to AASB 13’s guidance are necessary to avoid errors.

This section sets out a practical compliance roadmap based on the AASB’s explanations and the amendments described.

1. Determine applicability

• Identify whether the asset is primarily non-cash-generating and specialised and whether it is held for continuing use of its service capacity. The amendment and proposed Aus5.1 apply only to those assets of NFP entities (Redeliberation, Impairment of revalued assets, para 1). Document the assessment criteria and evidence supporting the classification.
• Confirm the entity’s accounting model for the asset: revaluation model or cost model (ED 269 proposals, Revaluation model and Cost model sections).

2. If the entity uses the revaluation model

• Ensure regular revaluations to fair value are performed in accordance with AASB 13 and AASB 116/AASB 138. Where regular revaluation is performed, AASB 136 need not be applied to those assets because carrying amounts will not be materially different from fair value (ED 269 proposals, Revaluation model; Redeliberation, para 3).
• Maintain documentation showing frequency and methodology of revaluations, valuer qualifications, inputs and assumptions, and reconciliations showing no material difference between carrying amount and fair value.

3. If the entity uses the cost model

• On impairment indicators, determine recoverable amount using fair value under AASB 13, not an entity-specific DRC value-in-use calculation (ED 269 proposals, Cost model).
• Engage qualified valuers if internal expertise is insufficient. Ensure valuers apply AASB 13’s cost approach correctly: replacement cost of remaining service capacity, adjustment for physical, functional and economic obsolescence, and consideration of overcapacity (Redeliberation, Clarifying CRC paras).
• Record highest and best use analysis, and demonstrate why current use is the highest and best use where applicable. Document any restrictions on use that support current use as the highest and best use.

4. Treatment of disposal costs

• When calculating net fair value, include only normal incremental costs directly attributable to disposal of the target asset. Do not include costs to change the asset’s nature or to enhance it for sale such as rezoning, demolition beyond removing what is necessary to make the asset saleable, or conversion costs (Redeliberation, Disposal costs paras 2-3).
• If disposal costs could be material in a specific case, document the assessment, provide evidence (market quotes, legal costs, planning authority requirements) and show how they affect net fair value.

5. Valuation inputs and special public sector considerations

• For public sector NFPs, review inputs such as capitalisation of borrowing costs; if national rules (for example ABS GFS Manual) prohibit capitalisation, document how this affects replacement-cost inputs and the rationale for any adjustments. The AASB notes this is a separate issue that may require project work, so take a conservative and well-documented approach (Redeliberation, para on capitalisation of borrowing costs).
• Ensure obsolescence adjustments are explicit and supported by evidence: physical deterioration schedules, functional or technological obsolescence analysis, and economic obsolescence indicators.

6. Disclosure and policy application

• Apply AASB 101 and AASB 108 for presentation and accounting policy changes. Disclose the nature and reason for any accounting policy change, the transitional impact if applicable, and comparative information required (Redeliberation, final para).
• Where fair value replaces prior DRC-based assessments, disclose the measurement basis, valuation technique(s) used, key inputs and assumptions, and sensitivity analysis where practicable.

7. Audit readiness

• Prepare a valuation file that includes the valuer’s report, methodology, comparable evidence, obsolescence adjustments, highest and best use analysis, and documentation distinguishing disposal costs from enhancement costs. Auditors will examine these files when testing the recoverable amount measurement.
• If management relies on the view that fair value will materially equal carrying amount due to regular revaluation practices, provide evidence of the frequency and rigour of revaluations.

8. Internal controls and governance

• Update impairment assessment policies and procedures to reflect that recoverable amounts for these specialised NFP assets are expected to be determined at fair value under AASB 13.
• Ensure governance processes include sign-offs by management and, where necessary, audit committees or equivalent bodies for valuation engagement, review and approval.

9. Practical cost-benefit calibration

• Consider whether the cost of obtaining external valuations on every impairment trigger is proportionate. For smaller entities or low-value assets, document why a valuation is not required (for example, immateriality or absence of significant indicators), and ensure this was judged against the new guidance.
• If revaluation is less costly in the long run (for example, if impairment testing costs under the old model were repeated), evaluate whether adopting the revaluation model is practicable and compliant with AASB 116/AASB 138.

10. Operational checklist

• Step 1: Classify the asset (non-cash-generating specialised asset held for service capacity?).
• Step 2: Confirm accounting model (revaluation or cost).
• Step 3: If revaluation model and revalued regularly, document and cease separate AASB 136 application for that asset; otherwise proceed to Step 4.
• Step 4: If impairment indicators, commission AASB 13 fair-value measurement, document highest and best use and disposal cost analysis, and apply net fair value as recoverable amount.
• Step 5: Update disclosures and accounting policy notes, and retain valuation evidence for audit.

Following these steps aligns practice with the AASB’s conclusions as recorded in the document and addresses the principal implementation risks described by the Board. Where jurisdictional or sector-specific rules (for example ABS GFS practice) create conflicts with valuation inputs, engage with auditors and, if necessary, seek clarification from sector regulators or the AASB as part of a documented governance process.