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 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 assets value in 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 units (group of units) recoverable amount has been determined

(d) the units (group of units) recoverable amount if it is based on value in use:

(e) If the units (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 units (group of units) recoverable amount would cause the units

(group of units) carrying amount to exceed its recoverable amount: