Difference between Ind AS 36 on Impairment of Assets, and existing AS 28 on Impairment of Assets

(i) Ind AS 36 applies to financial assets classified as:

a) subsidiaries, as defined in Ind AS 27,

b) associates as defined in Ind AS 28)

c) joint ventures as defined in Ind AS 31

The existing AS 28 does not apply to the above assets.

(ii) Ind AS 36 specifically excludes biological assets related to Agricultural activity. Existing AS 28 does not specifically exclude biological assets.

(iii) Ind AS 36 requires annual impairment testing for an intangible asset with an indefinite useful life or not yet available for use and goodwill acquired in a business combination. The existing AS 28 does not require the annual impairment testing for the goodwill unless there is an indication of impairment.

(iv) Ind AS 36 gives additional guidance on, inter alia, the following aspects compared to the existing AS 28:

a) estimating the value in use of an asset;

b) for managements to assess the reasonableness of the assumptions on which cash flows are based; and

c) using present value techniques in measuring an asset’s value in use.

(v) The existing AS 28 requires that the impairment loss recognised for goodwill should be reversed in a subsequent period when it was caused by a specific external event of an exceptional nature that is not expected to recur and subsequent external events that have occurred that reverse the effect of that event whereas Ind AS 36 prohibits the recognition of reversals of impairment loss for goodwill.

(vi) In the existing AS 28, goodwill is allocated to CGUs only when the allocation can be done on a reasonable and consistent basis. If that requirement is not met for a specific CGU under review, the smallest CGU to which the carrying amount of goodwill can be allocated on a reasonable and consistent basis must be identified and the impairment test carried out at this level. Thus, when all or a portion of goodwill cannot be allocated reasonably and consistently to the CGU being tested for impairment, two levels lof impairment tests are carried out, viz., bottom-up test and top-down test. In Ind AS 36, goodwill is allocated to cash-generating units (CGUs) or groups of CGUs that are expected to benefit from the synergies of the business combination from which it arose. There is no bottom-up or top-down approach for allocation of goodwill.

(vii) Ind AS 36 requires certain extra disclosures as compared to the existing AS 28. (ICAI)