Where the carrying amount of an asset or the cash-generating unit (CGU)
exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset. In determining fair value less costs to sell, recent market transactions
are taken into account, if available. If no such transactions can be identified, an
appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of financial performance in those
expense categories consistent with the nature of the impaired asset.
For assets, an assessment is made at each reporting date as to whether there is
any indication that previously recognized impairment losses may no longer exist
or may have decreased. If such an indication exists, the LGU estimates the
asset’s cash-generating unit’s recoverable amount. A previously recognized
impairment loss is reversed only if there has been a change in the assumptions
used to determine the asset’s recoverable amount since the last impairment loss
was recognized. The reversal is limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor does it exceed the carrying amount
that would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is recognized in
surplus or deficit.
Impairment of non-cash-generating assets
The LGU assesses at each reporting date whether there is an indication that a
non-cash-generating asset may be impaired. If any indication exists, or when
annual impairment testing for an asset is required, the LGU estimates the asset’s
recoverable service amount. An asset’s recoverable service amount is the higher
of the non-cash generating asset’s fair value less costs to sell and its value in
use.
Where the carrying amount of an asset exceeds its recoverable service amount,
the asset is considered impaired and is written down to its recoverable service
amount.
In assessing value in use, the LGU adopted the depreciated replacement cost
approach. Under this approach, the present value of the remaining service
potential of an asset is determined as the depreciated replacement cost of the
asset. The depreciated replacement cost is measured as the reproduction or
replacement cost of the asset, whichever is lower, less accumulated depreciation
calculated on the basis of such cost, to reflect the already consumed or expired
service potential of the asset. In determining fair value less costs to sell, the price
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