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Summary of Impairment of assets

There has been a very intensive argument on some of the aspects in AASB 136,

especially as regard to impairment assets. A number of accounting users have concern on

specific aspects in AASB 136 putting claims that they are confusing (Queensland Government

1). In as much as AASB 136 impairment asset is more detailed, citing some of the areas that

were not clearly addressed by AASB 1010, users get confused in some number of areas

(Queensland Government 1). Depreciated replacement cost (DRC), under ASSB 136

improvement of Assets, is considered as a measure of value for non-profit entities. In this case,

so many clarifications have not been given on how depreciated replacement cost represents a fair

value. There is so much confusion on the meaning of fair value as used on DRC according to

AASB 136. It is not clear whether DRC should be considered as fair value as it was initially

known or as a value in use as referenced by AASB 136 impairment asset. There is much

confusion on how to come up with the right definition of fair value and value in use especially

going by the provisions by DRC, AASB 13, and AASB136.

Most local governments use depreciated replacement cost to measure fair value of their

assets, which is so confusing when recoverable amount becomes depreciated replacement cost of

the asset as defined clearly in the AASB 116. If it is the case then, the asset's carrying amount is

already reflected by DRC, which then should not be used in determining the recoverable amount

(Queensland Government 1). There is only the need to adjust the carrying amount of assets

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through re-evaluation decrement, but not impairment, which is a potential confusion in

impairment asset as shown by AASB 136.

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Works Cited

Queensland Government. “Accounting For Infrastructure Damaged By Natural Disasters.”

Department Of Local Government, Community Recovery, and Resilience. 2014. From

web 16 November 2014.