Extracts from relevant Accounting Standards for Private Enterprises (ASPE)
Section 3063, Impairment of Long-lived Assets, paragraphs 3063.04-.06, 3063.09-.11, 3063.18-.19, 3063.24
Section 3063 establishes the standards for the recognition, measurement, and disclosure of the impairment of long-lived assets, such as property, plant, and equipment, and intangible assets with a finite useful life. Section 3063 requires an entity to test for recoverability whenever events or changes in circumstances indicate that a long-lived asset’s carrying amount may not be recoverable. Educational material published by the IFRS Foundation explains the following: “Climate-related matters may give rise to indications that an asset (or a group of assets) is impaired. For example, a decline in demand for products that emit greenhouse gases could indicate that a manufacturing plant may be impaired, requiring the asset to be tested for impairment.” Another example is a change in regulations surrounding acceptable limits for emissions could indicate equipment or vehicles should be tested for impairment. When a long-lived asset is tested for recoverability, it may be necessary to review amortization estimates and methods.
Section 3063 provides guidance on the cash flow test for recoverability, stating that estimates of future cash flows used to test the recoverability of a long-lived asset shall include only the future cash flows (cash inflows less associated cash outflows) that are directly associated with, and that are expected to arise as a direct result of, its use and eventual disposition. The estimates incorporate the entity’s own assumptions about its use, considering all available evidence and the likelihood of various possible outcomes using a probability-weighted approach, if applicable. Entities will need to consider whether climate-related matters affect assumptions and projections used in determining the estimate of future cash flows. For example, projected cash outflows related to the “introduction of emission-reduction legislation” that has increased manufacturing costs.
Section 3063 requires disclosure of a description of the impaired long-lived asset, a description of the facts and circumstances leading to the impairment, and, if not separately presented on the face of the income statement, the amount of the impairment loss and the caption in the income statement that includes that loss.