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the shared asset and therefore does not recognise the asset in the combined
and/or carve-out financial statements. However, because the combined/
carved-out reporting entity generally uses and benefits from the shared assets,
other standards might be applicable – e.g. IAS17 in combination with IFRIC4
Determining whether an Arrangement contains a Lease.
It is observed in practice that the shared asset is generally treated as an operating
lease. As a consequence, the combined/carved-out reporting entity (i.e. lessee)
does not recognise the leased asset in its combined and/or carve-out financial
statements. The combined/carved-out reporting entity, however, includes the
expense associated with the use of the shared assets.
Similar considerations to those outlined in Chapter 4.2 apply to whether there is
an element of the larger reporting entity acting in its capacity as a shareholder in
any transactions involving shared assets and, consistent with Example 4A, in some
cases it may be appropriate to recognise a capital contribution or distribution and
to measure the use of the shared asset at fair value.
The second, less common, approach that we have observed is that the asset is
recognised in the combined and/or carve-out financial statements, together with
the related depreciation and any impairment losses. ‘Allocated’ income (a recovery
charge) is recognised for the use of the asset by other components of the larger
reporting entity, measured in accordance with one of the approaches outlined
in4.2.10.
These approaches may not be consistent with the principles of IFRS for generic
financial statements. However, both approaches may have some technical merit
for combined and/or carve-out financial statements.
Follo
wing principles similar to property, plant and equipment, recognisable
intangible assets clearly attributable to the combined/carved-out reporting entity
are usually accounted for following either of the two approaches highlighted
above in the combined and/or carve-out financial statements. Most businesses
have intangible assets, including licences, trademarks, patents and customer
lists, which may have been developed internally or purchased, or may have been
acquired in a businesscombination.
4.5.20 Impairment testing of non-financial assets
The preparation of combined and/or carve-out financial statements does not
in itself represent a triggering event for impairment testing under IAS36
Impairment of Assets. However, an indication of impairment may exist because
the identification and aggregation of cash-generating units and the measurement
and/or allocation of ‘reorganised’ goodwill (seeSection 3) in the combined and/or
carve-out financial statements differs from the application of IAS36 in the larger
reporting entity’s consolidated financial statements. This means that additional
impairment testing might be required for the purposes of the combined and/or
carve-out financial statements.
For further guidance, see Chapter3.10 in Insights into IFRS.
Insights 6.1.1060.50, 1110 In addition, to the extent that IFRS1 is applied and the combined/carved-out
reporting entity uses the optional exemption for business combinations, goodwill
acquired in an unrestated business combination is required to be tested for
impairment at the date of transition, and we prefer that goodwill acquired in a
restated business combination is tested for impairment at the date of transition.
4 Accounting policies and estimates
45
4.5 Statement of financial position