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IFRS IC Agenda decision - IAS 36 Impairment of Assets - Calculation of Value in Use


The Interpretations Committee received a request for guidance on whether an entity can use a dividend-based model when calculating value in use (VIU) for the purpose of performing an impairment test in accordance with IAS 36 Impairment of Assets.

Specifically, the request raises this issue in the context of an impairment test of a subsidiary in the consolidated financial statements of a parent, when the subsidiary operates in the financial services sector and is a separate cash-generating unit (CGU).

The Interpretations Committee decided not to add this item to its agenda and noted that in its view the requirements in IAS 36 are clear in relation to the calculation of value in use. However, it also observed that the calculations using DDM's would rarely be appropriate when calculating value in use of a CGU in the consolidated financial statements. EFRAG addresses wordings for rejection published by the Interpretations Committee by exception, i.e. when European constituents express concern that they are expected to have a significant and undesirable effect in practice and EFRAG would share that concern after proper assessment of the wording for rejections. Such circumstances have just arisen with the Interpretations Committee issuing its tentative wording for rejection on IAS 36 - Calculation of Value in Use. EFRAG noted in its comment letter that, in its view, it is inappropriate for the Interpretations Committee to create, what appears to be, a rebuttable presumption in the wording for rejection by stating that 'using DDMs would rarely be appropriate'.

This project finished at the Comment Letter stage.

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