Limitations of Mfrs 136

LIMITATIONS OF MFRS 136: IMPAIRMENT OF ASSET

Regulators, standard setters and practitioners have expressed concerns that accounting standards and regulations have become too much and too complex and that this has resulted in negative consequences for the users. There are some limitations of the MFRS 136: impairment of asset. 1) Too wordy The words used in MFRS 136 is too wordy and make the users difficult to understand the content. The users have to put p ut more effort to acquire and process this information in order to understand it well. In order to process the information, the users have to repeat their readings two or three times. They also have to jot down the important information or make some notes for better understanding.

2) Complicated The explanation in MFRS 136 are too complicated because there are too many elements should be reflected in the calculation of an asset’s value in use use.. There are also many requirements in identifying an asset that may be impaired. The users have to identify when recoverable amount shall be determined. These requirements use the term ‘an asset’ but apply equally to an individual asset or a cash-generating unit. The users have to understand how to measure the recoverable amount of the asset. Besides, they also have to recognize and measure an impairment loss and it have several steps to follow to find those amount.

3) Too many disclosure. An entity shall disclose the following for each class of assets: (a) The amount of impairment losses recognized in profit or loss during the period and the line item(s) of the statement of comprehensive income in which those impairment losses are included.

(b) The amount of reversals of impairment losses recognized in profit or loss during the  period and the line item(s) of the statement of comprehensive income in which those impairment losses are reversed.

(c) The amount of impairment losses on revalued assets recognized in other comprehensive income during the period.

(d) The amount of reversals of impairment losses on revalued assets recognized in other comprehensive income during the period

An entity shall disclose the information required by (a) – (f) for each cash-generating unit for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit. (a) The carrying amount of goodwill allocated to the unit (group of units). (b) The carrying amount of intangible assets with indefinite useful lives allocated to the unit (group of units). (c) The basis on which the unit’s (group of units’) recover able amount has been determined (d) the unit’s (group of units’) recoverable amount if it is based on value in use: (e) If the unit’s (group of units’) recoverable amount is based on fair value less costs of disposal, the valuation technique(s) used to measure fair value less costs of disposal. An entity is not required to provide the disclosures required by MFRS 13. (f) If a reasonably possible change in a key assumption on which management has based its determination of the unit’s (group of units’) recoverable amount would cause the unit’s (group of units’) carrying amount to exceed its recoverable amount: