Intangible assets with indefinite useful lives and intangible assets not yet in use are tested annually for impairment and whenever there is an indication of impairment. All rights reserved. Given the unique nature of such services, a suffi-ciently reliable comparable transaction may be difficult to identify and therefore other TP methods may be more reliably applied. A list of PwC’s key IFRS publications are provided on the inside front cover. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Intangibles Assets Non-financial assets recognised by an entity under Ind AS may include, tangible fixed assets such as Property, Plant and Equipment (PPE), investment property and intangible assets such as technology, brands, etc. Companies should take a fresh look at existing processes and controls for assessing asset impairment, as proper identification of triggering events is integral to appropriately measuring goodwill impairment. Examples of intangible assets with a limited-life include copyrights and patents. In rising interest rate environments, the fair value of these financial assets will often be significantly less than the carrying value, which consequently could lead to the impairment of goodwill to reflect the decrease in the fair value of the reporting unit. Specifically, if an entity has tax-deductible goodwill, there is the possibility of running into a cycle of impairment due to the decreasing book value of its goodwill increasing its deferred tax asset (or decreasing its deferred tax liability). equipment and IAS 38 Intangible assets – Variable payments for asset purchases The IC received a request to address the accounting for variable payments to be made for the purchase of an item of property, plant and equipment or an intangible asset that is not part of a business combination. Besides goodwill and long-lived intangible assets, this may trigger the requirement for impairment tests for property, plant and equipment (PPE), inventory, financial assets, real estate and investments (including investments in associates and joint ventures). intangible assets, for which an annual impairment test is required, IAS 36 requires reporting entities to assess at the end of each reporting period whether there is any indication of impairment for all assets (within the scope). Additionally, recognition of the impairment of the long-lived asset that contributed to the goodwill impairment may occur at a later date. The IC was unable to reach a consensus on Please see www.pwc.com/structure for further details. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. It is highly recommended that entities consult with their technical accounting advisors and valuation professionals when assessing the potential effects of a choice in valuation methodology. Under the new guidance, the goodwill impairment charge would capture the decline in fair value of the long-lived assets. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. An asset is identifiable if either: it is separable (that is, it is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged); or it arises from contractual or legal rights. Some acquirers might be motivated to report fewer intangibles, and higher goodwill, because most intangible assets must be amortised whereas goodwill is measured under an impairment only approach. Such assets should be tested for impairment Heather Horn is joined by PwC National office subject matter specialists to discuss the most important considerations when assessing ROU assets for impairment. Start adding content to your list by clicking on the star icon included in each card. 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. 6 Taxation of intangible assets We take it further PwC offers you a multi-disciplinary team to help you design tax optimisation policies and processes for your company’s intangible assets management strategy, generating tax savings that are better applied to financing your business growth. An impairment loss takes place when a company makes a judgment call that the carrying value of an intangible asset on the company balance sheet is less than fair value, or what an unpressured person would pay for the asset in an open marketplace. Set preferences for tailored content suggestions across the site, Navigating the new goodwill impairment testing guidance (ASU 2017-04), {{contentList.dataService.numberHits}} {{contentList.dataService.numberHits == 1 ? an asset is determined after deducting its residual value. Observations from the front lines provides PwC’s insight on current economic issues, our perspective regarding the financial reporting complexities, and what companies should be thinking about to effectively address those issues. 1. All rights reserved. 1 of 3 Save and exit Continue Cancel Under IAS 36, ‘Impairment of assets’, these assets are required to be tested annually for impairment irrespective of indictors of impairment (IAS 36 para 10). As with the existing model, getting the sequencing right can help avoid potential errors in assessing impairment. These valuations will require significant professional judgement. Under the new guidance, if the equity premise is used for a reporting unit with a negative carrying amount, the reporting unit cannot have an impairment since the reporting unit’s fair value will always be greater than its carrying value. This includes clearly outlining information and data requirements, as well as key decision points to effectively test goodwill for impairment. The revised goodwill impairment model does not change the sequencing of impairment testing for assets (or asset groups) held and used or held for sale. The amount of impairment recorded or reversed must be disclosed, including the circumstances leading to that impairment or reversal. Impairment of Intangibles with Indefinite Lives. As leases are now recorded on the balance sheet, we begin with a recap of how the long-lived asset impairment model works. Asset impairment tests Typical intangible assets at telecom companies, besides goodwill, are telecom licences, internally developed software, subscriber acquisition costs3 and customer relationships, brands and trademarks acquired in a business combination. and impairment of acquired programming rights under the applicable IFRS standards IAS 2 Inventories and IAS 38 Intangible Assets. The amount of the impairment loss reduces the carrying amount of the asset on the balance sheet and reduces net income on the income statement. This document sets out to highlight potential challenges that preparers of impairment assessments are likely to face in the current environment. Such assets should be tested for impairment PwC and UNICEF, in support of Generation Unlimited, believe securing digital access for millions of youth can be a driver of new, more resilient economies. 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