Accounting StandardAASB 1010December 1999Recoverable Amount ofNon-Curr - PDF document

Accounting StandardAASB 1010December 1999Recoverable Amount ofNon-Current Assets Issued by the Australian Accounting Standards Board AASB 10102Obtaining a Copy of this Accounting StandardCopies of this Standard are available for purchase from the AustralianAccounting Standards Board by contacting:The Customer Service OfficerAustralian Accounting Research Foundation211 Hawthorn RoadCaulfield Victoria 3162AUSTRALIA(03) 9524 3637Fax:(03) 9524 3687E-mail:Web site:www.aarf.asn.auOther enquiries:Phone:(03) 9524 3600Fax:(03) 9523 5499E-mail: 1999 Australian Accounting Standards Board. The copying of thisStandard is only permitted in certain circumstances. Enquiries should bedirected to the Australian Accounting Standards Board.ISSN 1036-4803 AASB 10103MAIN FEATURES OF THE STANDARD … page 5Section and page number1Application … 72Scope … 7… 7Non-Current Assets Measured at Fair Value,Net Market Value or Net FairValue … 8Inventories … 9Materiality … 9Operative Date … 94Purpose of Standard … 105Recoverable Amount Test … 10General … 10Recoverable Amount and Groupsof Assets … 11Community Service Obligations … 11Accounting for Recoverable AmountWrite-Downs … 127Disclosures … 128Transitional Provisions … 139Definitions … 14Class of Non-Current Assets … 19Not-for-Profit Entities … 19CONFORMITY WITH INTERNATIONAL AND NEWZEALAND ACCOUNTING STANDARDS … page 21BACKGROUND TO REVISION … AASB 10104Defined words appear in italics the first time they appear in a section. The definitions are in Section 9. Standards are printed in bold type and commentary in light type. AASB 10105MAIN FEATURES OF THE STANDARDThe Standard is principally a reissue of the requirements concerning therecoverable amount test for non-current assets set out in Accounting StandardAASB 1010 “Accounting for the Revaluation of Non-Current Assets” asissued in June 1996. In addition, it includes new commentary clarifying that,where net cash flows are discounted to their present value when measuringthe recoverable amount of non-current assets, meeting the requirement(retained from the superseded Standard) to disclose the assumptions made inrespect of the assets’ recoverable amount includes disclosing the discountrate used.The Standard, which applies to non-current assets measured on the cost basis:(a)requires the carrying amounts of non-current assets to be writtendown to their recoverable amount when their carrying amount isgreater than their recoverable amount(b)defines the recoverable amount of an asset as the net amount that isexpected to be recovered through the cash inflows and outflowsarising from its continued use and subsequent disposal(c)excludes not-for-profit entities from the requirement to write downto their recoverable amount assets which are not held for theprimary purpose of generating net cash inflows(d)defines a not-for-profit entity to mean an entity whose financialobjectives do not include the generation of profit(e)requires disclosure of the carrying amounts of non-current assetswritten down to their recoverable amount, the amounts ofrecoverable amount write-downs, and accounting policies applied inrespect of the method of determining recoverable amount.Measuring non-current assets on the cost basis includes measuringnn-current assets at “deemed cost”. A class of non-current assets ismeasured at deemed cost where the entity previously revalued that class ofassets and, under the transitional provisions in Accounting StandardAASB 1041 “Revaluation of Non-Current Assets”, as issued inDecember 1999, elects to deem the opening (revalued) carrying amount ofassets comprising the class to be the assets’ cost for the purpose of revertingto the cost basis as at the date of first applying AASB 1041.Because the Standard applies to non-current assets measured on the costbasis, it requires recoverable amount write-downs to be recognised as AASB 10106expenses in net profit or loss. Background to this requirement is provided inthe “Background to Revision” set out after the Accounting Standard.The Australian Accounting Standards Board and the Public SectorAccounting Standards Board have developed Exposure Draft ED 99“Impairment of Assets”, which was issued for comment in December 1999.A Standard developed from ED 99 would replace the Standard. ED 99itemises a range of proposed scope exclusions. Similar scope exclusions arenot itemised in the Standard, which retains the style of drafting from thesuperseded Standard. However, as no substantive changes have been madeto the requirements of the Standard, the scope of the Standard is essentiallyunchanged from the superseded Standard.The Standard has been reissued at this time solely to facilitate the separate issue of Accounting Standard AASB 1041 “Revaluation of Non-Current Assets. Whilst the Standard has been reissued for this purpose, the Boards do not support the option carried forward to the Standard to use undiscounted cash flows to measure an asset’s recoverable amount. AASB 10107ACCOUNTING STANDARD AASB 1010The Australian Accounting Standards Board makes Accounting StandardAASB 1010 “Recoverable Amount of Non-Current Assets” under 334 of the Corporations Law.K H SpencerDated 23 December 1999Director – AASBACCOUNTING STANDARDAASB 1010 “RECOVERABLE AMOUNT OFNON-CURRENT ASSETS”This Standard applies to each entity which is required toprepare financial reports in accordance with Part 2M.3 of theCorporations Law and which:(a)is a reporting entity; or(b)holds those financial reports out to be, or form part of,a general purpose financial report.Not-for-Profit Entities2.1This Standard does not apply to non-current assets ofnot-for-profit entities where the future economic benefitscomprising those assets are not primarily dependent on theassets’ ability to generate net cash inflows.2.1.1The requirement that the carrying amounts of non-current assets donot exceed their recoverable amount does not apply to thenn-current assets of not-for-profit entities whose future economicbenefits are not primarily dependent on the ability to generate netcash inflows. A diminution in the ability of the non-current assetsof not-for-profit entities to generate net cash inflows does not AASB 10108necessarily represent a decline in their future economic benefits.The future economic benefits comprising such assets are indicatedby the goods and services the assets provide.2.1.2The form of the future economic benefits comprising somenn-current assets of not-for-profit entities is in the services theassets provide rather than in the generation of net cash inflows fromconsumers. The carrying amount of such assets in the statement offinancial position should reflect their remaining future economicbenefits as at the reporting date, measured at an amount consistentwith the measurement model applied by the entity in respect of itsnn-current assets. In those circumstances where the futureeconomic benefits comprising non-current assets of not-for-profitentities are primarily dependent on the assets’ ability to generate netcash inflows, this Standard specifies that the carrying amount ofsuch assets should not exceed their recoverable amount.Non-Current Assets Measured at Fair Value, NetMarket Value or Net Fair Value2.2This Standard does not apply to non-current assets measured atfair value, net market value or net fair value as required orpermitted by another Accounting Standard.2.2.1This Standard does not apply to non-current assets measured on thefair value basis as permitted by Accounting Standard AASB 1041“Revaluation of Non-Current Assets”. AASB 1041 requires thatwhere a class of non-current assets is measured on the fair valuebasis, revaluations are to be made with sufficient regularity toensure that the carrying amounts of the assets comprising that classdo not differ materially from their fair value. The carrying amountsof non-current assets measured on the fair value basis underAASB 1041 cannot be overstated, and accordingly, these assets areexempted from the application of this Standard.2.2.2Other assets referred to in paragraph 2.2 include:(a)financial assets of registered schemes and undertakings towhich prescribed interests relate measured at net marketvalue as at the reporting date with changes in net marketvalue recognised as revenues or expenses in net profit orloss for the reporting period, as permitted by AASB 1041 AASB 10109assets measured at net market value as required by:(i)Accounting Standard AASB 1023 “Reporting of General Insurance Activities”Accounting Standard AASB 1037“Self-Generating and Regenerating Assets”This Standard does not apply to inventoriesInventories are accounted for in accordance with AccountingStandard AASB 1019 “”, which prohibits the carrying ofinventories at amounts greater than net realisable value.MaterialityThe standards specified in this Standard apply to the financial reportwhere information resulting from their application is material, inaccordance with Accounting Standard AASB 1031 “MaterialityOperative Date3.1This Standard applies to reporting periods beginning on or after1 July 2000.3.2This Standard may be applied to reporting periods beginningbefore 1 July 2000, provided that:(a)Accounting Standard AASB 1041 “Revaluation ofNon-Current Assets”, as issued in December 1999, isalso applied for the same reporting periods(b)an election has been made in accordance withsubsection 334(5) of the Corporations Law.3.2.1This revised Standard and Accounting Standard AASB 1041“Revaluation of Non-Current Assets” (as issued in December 1999)together replace Accounting Standard AASB 1010 “Accounting forthe Revaluation of Non-Current Assets”, as issued in June 1996.AASB 1010, as issued in June 1996, continues to apply for reportingperiods that begin before 1 July 2000. However, an entity can electto apply this Standard early in accordance with paragraph 3.2. If itmakes this election, the entity would not also be obliged to comply AASB 101010with AASB 1010, as issued in June 1996, for the reporting periodsto which the election applies, provided the entity also complies withAccounting Standard AASB 1041 “Revaluation of Non-CurrentAssets. The scope of AASB 1041 is limited to applying the costbasis or the fair value basis to measure the carrying amounts of non-current assets.When operative, this Standard and Accounting StandardAASB 1041 “Revaluation of Non-Current Assets”, as issued inDecember 1999, supersede Accounting Standard AASB 1010“Accounting for the Revaluation of Non-Current Assets” asapproved by notice published in Commonwealth of AustraliaGazette No. S 236 on 27 June 1996.3.3.1Notice of this Standard was published in the Commonwealth ofAustralia Gazette on 24 December 1999.4Purpose of Standard4.1The purpose of this Standard is to:(a)quire the application of the recoverable amount test tonon-current assets(b)require disclosures relating to the application of therecoverable amount test to non-current assets.5Recoverable Amount TestGeneralSubject to paragraph 5.2, a non-current asset must be writtendown to its recoverable amount when its carrying amount isgreater than its recoverable amount.5.1.1A recoverable amount write-down recognises that future economicbenefits which had previously been assessed as being available tothe entity no longer exist.5.1.2Recoverable amount write-downs are not revaluations.Accordingly, the recognition of a recoverable amount write-down inrespect of a non-current asset does not oblige the entity to revaluethe class of non-current assets to which that asset belongs. AASB 101011Recoverable Amount and Groups of Assets5.2Where a group of assets working together supports thegeneration of net cash inflows relevant to the determination ofrecoverable amount, the net cash inflows must be estimated forthe relevant group of assets and the recoverable amount testmust be applied to the carrying amount of that group of assets.5.2.1It is not appropriate to identify the expected net cash inflowsapplicable to individual assets where a group of assets workingtogether supports the generation of net cash inflows relevant to thedetermination of recoverable amount. In order to identify whetherthere has been a decline in the future economic benefits comprisingthose individual assets, it is necessary to estimate the net cashinflows for the relevant group of assets and compare that amountwith the carrying amount of the group of assets.Community Service Obligations5.3Where, pursuant to legislation, ministerial directive or othergovernment authority, non-current assets are used to providegoods or services at no charge, or at less than full cost recovery,those assets must be included in the group of assets that isdependent on the provision of those goods or services to enableit to generate net cash inflows. The net cash inflows must beestimated for that group of assets and the recoverable amounttest must be applied to the carrying amount of that group ofassets.Entities other than not-for-profit entities, for example governmentbusiness entities, may, pursuant to legislation, ministerial directiveor other government authority, be required to provide certain goodsor services without charge or at a charge which is less than the fullcost of those goods and services. As a consequence of meeting such“community service obligations”, an entity may receive governmentsupport in the form of grants and capital or other contributions.5.3.2The carrying amounts of non-current assets deployed in communityservice activities are not written down solely because the amountspresently expected to be recovered directly from the goods andservices produced by those activities are less than the carryingamount of those assets. In these cases, the relevant group of assetswould not be restricted to those assets directly employed insatisfying the community service obligations imposed by legislation,ministerial directive or other government authority. AASB 101012Accounting for Recoverable AmountWrite-DownsWhere the carrying amount of a non-current asset or a group ofnon-current assets is written down to its recoverable amount inaccordance with paragraph 5.1 or paragraph 5.2, the decrementin that carrying amount must be recognised as an expense in netprofit or loss for the reporting period in which the recoverableamount write-down occurs.6.1.1After the expiry of the transitional provisions in AccountingStandard AASB 1041 “Revaluation of Non-Current Assets”, thisStandard will apply only to non-current assets measured on the costbasis. It is consistent with the cost basis of measurement to treat anyrecoverable amount write-down of a non-current asset as an expensein net profit or loss.6.1.2Upon the initial adoption of AASB 1041, if an entity elects to revertto the cost basis to measure a previously revalued class ofnon-current assets, either of the following will occur:(a)retrospective adjustments will be made to adjust thecarrying amounts of the assets to the amounts at which theywould have been carried under the cost basis. In this case,the balance of the asset revaluation reserve in respect ofthat class will be reversed in accordance with thetransitional provisions in AASB 1041(b)the revalued carrying amounts of the assets within thatclass as at the date of first adopting that Standard will bedeemed to be the cost of those assets, and the balance of theasset revaluation reserve as at that date will be unaffectedby the change.7Where the carrying amount of a non-current asset or a class ofnon-current assets has been written down to its recoverable in accordance with paragraph 5.1 or paragraph 5.2, thefinancial report must, in respect of each such non-current assetor class of non-current assets, disclose:(a)its carrying amount AASB 101013the recoverable amount write-down recognised duringthe reporting period(c)the assumptions made in respect of its recoverableamount.Where some or all of the assets within a class of non-currentassets have been written down to their recoverable amountduring the reporting period or a previous reporting period, thefinancial report must disclose the aggregate carrying amount ofeach of the following:(a)assets within that class of non-current assets which arecarried at that recoverable amount less, whereapplicable, any subsequent accumulated depreciation(b)any other assets within that class of non-current assets.7.2.1The term “, which is often used interchangeably withthe term “”, includes amortisation for the purposes ofthis Standard. The terms have the same meaning, however,depreciation is generally used in relation to non-current assets thathave physical substance while amortisation is generally used inrelation to intangible non-current assets.7.3The financial report must, regardless of whether non-currentassets have been written down to recoverable amount during thereporting period, disclose whether, in complying withparagraphs 5.1 and 5.2, the expected net cash flows included indetermining the recoverable amounts of non-current assets havebeen discounted to their present value.7.3.1Where net cash flows are discounted to their present value whenmeasuring the recoverable amount of non-current assets, disclosureof the assumptions made in respect of the assets’ recoverableamount [to comply with paragraph 7.1(c)] includes disclosure of thediscount rate used.8Transitional Provisions8.1Where the superseded Standard did not apply to the entity andaccounting policies required by this Standard are not alreadybeing applied as at the beginning of the reporting period to whichthis Standard is first applied, they must be applied as at thatdate. Where this gives rise to initial adjustments which would AASB 101014otherwise be recognised in net profit or loss, the net amount ofthose adjustments, including any adjustments to deferredincome tax balances, must be adjusted against retained profitsor accumulated losses as at the beginning of the reporting periodto which this Standard is first applied.9In this Standard:accounting policies means the specific accounting principles,bases or rules adopted in preparing and presenting thefinancial reportassets means future economic benefits controlled by the entity asa result of past transactions or other past eventsborrowing corporation is defined in the Corporations Lawcarrying amount means:(a)in relation to an asset, the amount at which theasset is recorded in the accounting records as at aparticular date. In application to a depreciableasset, carrying amount means the net amount afterdeducting accumulated depreciation(b)in relation to a class of assets, the sum of thecarrying amounts of the assets in that classcash assets means cash on hand and cash-equivalent assetscash-equivalent assets means highly liquid investments withshort periods to maturity which are readily convertible tocash on hand at the investor’s option and are subject to aninsignificant risk of changes in valuecash on hand means notes and coins held, and deposits held atcall with a financial institutionclass of non-current assets means a category of non-current having a similar nature or function in the operationsof the entity, which category, for the purpose of disclosurein the financial report, is shown as a single item withoutsupplementary dissection AASB 101015 is defined in the Corporations Lawcurrent asset means an asset that:(a)is expected to be realised in, or is held for sale orconsumption in, the normal course of the entity’operating cycle; or(b)is held primarily for trading purposes or for theshort-term and is expected to be realised withintwelve months of the reporting date; or(c)is cash or a cash-equivalent asset which is notrestricted in its use beyond twelve months or thelength of the operating cycle, whichever is greatereconomic entity means a group of entities comprising the parent and each of its subsidiaries means any legal, administrative, or fiduciaryarrangement, organisational structure or other party(including a person) having the capacity to deploy scarceresources in order to achieve objectivesexpenses means consumptions or losses of future economicbenefits in the form of reductions in assets or increases inliabilities of the entity, other than those relating todistributions to owners, that result in a decrease in equityduring the reporting periodextraordinary items means items of revenue and expense that areattributable to transactions or other events of a type thatare outside the ordinary activities of the entity and are not ofa recurring naturefair value means the amount for which an asset could beexchanged, or a liability settled, between knowledgeable,willing parties in an arm’s length transactionfinancial asset means any asset that is:(a)cash; or(b)a contractual right to receive cash or anotherfinancial asset from another entity; or AASB 101016a contractual right to exchange financialinstruments with another entity under conditionsthat are potentially favourable; or(d)an equity instrument of another entityfinancial institution means:an entity (including an economic entity) whoseprincipal activity is to take deposits or borrow, orboth take deposits and borrow, with the objective oflending or investing in financial assets other thanequity instruments, but excluding:(i)entities which take deposits or borrowprincipally from other entities in theeconomic entity; and(ii)general insurers, life insurers andsuperannuation plans; or(b)an entity (including an economic entity) subject tothe Banking Act 1959 or any replacement legislationfinancial year is defined in the Corporations Lawgeneral purpose financial report means a financial reportintended to meet the information needs common to userswho are unable to command the preparation of reportstailored so as to satisfy, specifically, all of their informationneeds is defined in the Corporations Lawholding company is defined in the Corporations Lawinventories means assets:(a)held for sale in the ordinary course of business; or(b)in the process of production, preparation orconversion for such sale; or(c)in the form of materials or supplies to be consumedin the production of goods or services available forsale AASB 101017excluding depreciable assets, as defined in AccountingStandard AASB 1021 “Depreciation”listed corporation is defined in the Corporations Lawmonetary assets means money held, and assets to be received infixed or determinable amounts of moneynet market value means the amount which could be expected tobe received from the disposal of an asset in an active andliquid market after deducting costs expected to be incurredin realising the proceeds of such a disposalnet profit or loss means:in the case of an entity that is not an economic, profit or loss after income tax expense(income tax revenue) from ordinary activities andextraordinary items(b)in the case of an entity that is an economic entity,profit or loss after income tax expense (income taxrevenue) from ordinary activities andextraordinary items, before adjustment for thatportion that can be attributed to outside equityinterestnon-current assets means all assets other than current assetsnot-for-profit entity means an entity whose financial objectivesdo not include the generation of profitordinary activities means activities that are undertaken by anentity as part of its business or to meet its objectives andrelated activities in which the entity engages in furtheranceof, incidental to, or arising from activities undertaken tomeet its objectivesparent entity means an entity which controls another entityproperty, plant and equipment means tangible non-current assetsthat:are held by an entity for use in the production orsupply of goods or services, for rental to others, orfor administrative purposes and may include itemsheld for maintenance or repair of such assets AASB 101018have been acquired or constructed with theintention of being used on a continuing basisrecognised means reported on, or incorporated in amountsreported on, the face of the statement of financialperformance or the statement of financial position (whetheror not further disclosure of the item is made in notes)recoverable amount means, in relation to an asset, the netamount that is expected to be recovered through the cashinflows and outflows arising from its continued use andsubsequent disposalreporting date means the end of the reporting period to whichthe financial report relatesreporting entity means an entity (including an economic entity)in respect of which it is reasonable to expect the existence ofusers dependent on general purpose financial reports forinformation which will be useful to them for making andevaluating decisions about the allocation of scarceresources, and includes but is not limited to the following:(a)a listed corporation(b)a borrowing corporation(c)a company which is not a subsidiary of a holdingcompany incorporated in Australia and which is asubsidiary of a foreign company where that foreigncompany has its securities listed for quotation on astock market or those securities are traded on astock marketreporting period means the half-year or financial year to whichthe financial report relatesstatement of financial performance means profit and lossstatement as required by the Corporations Lawstatement of financial position means balance sheet as requiredby the Corporations Lawstock market is defined in the Corporations Lawsubsidiary means an entity which is controlled by a parententity. AASB 101019Class of Non-Current Assets9.1.1ing the requirements in paragraphs 7.1 and 7.2 is thedefinition of “class of non-current assets” in paragraph 9.1. Thisdefinition, which is consistent with the view that non-current assetsshould be classified according to their nature or function in theoperations of the entity, defines classes of non-current assets interms of the lowest level of aggregation adopted in the financialreport for disclosure of non-current assets having a similar nature orfunction. In the preparation of consolidated financial reports, thedefinition of “class of non-current assets” is applied to the economicentity as a single entity.Not-for-Profit Entities9.1.2Not-for-profit entities include all public sector entities other thangovernment business entities, and those private sector entities whoseobjectives do not include the generation of profit, including asurplus, for distribution to members.9.1.3Government business entities are those government entities whoseobjectives encompass the generation of profit from the provision ofgoods and services to consumers at charges equal to or greater thanthe full cost of those goods and services. The financial objectives ofgovernment business entities may encompass the achievement ofeither a nominated profit target or a nominated rate of return onassets employed.9.1.4Private sector not-for-profit entities are frequently characterised bythe absence of defined ownership interests that can be sold,transferred and/or redeemed, and are frequently formed for social,educational, religious, health or philanthropic purposes. Privatesector entities which would be classified as not-for-profit entitieswould include charitable organisations and those clubs and societieswhose overall financial objectives do not encompass the generationof profit. Private sector not-for-profit entities do not include clubs,credit unions, co-operatives, member service organisations and otherorganisations which generate profit for the benefit of members. Anentity which ostensibly operates on a not-for-profit basis but whichis part of an economic entity whose objective is to generate profitwould in substance be an entity concerned with profit seeking and,accordingly, would not meet the definition of a not-for-profit entity.9.1.5rofit entities may sell particular goods and services toconsumers at charges greater than the full cost of those goods andservices, and may fund future acquisitions of plant and equipment AASB 101020from surpluses generated by such sales. However, the continuinglong-term operation of not-for-profit entities largely depends ongrants, parliamentary appropriations, membership subscriptionsand/or gifts, donations and bequests, rather than on the sale of goodsand services at a profit. AASB 101021CONFORMITY WITH INTERNATIONAL ANDNEW ZEALANDACCOUNTING STANDARDSConformity with International AccountingStandardsThe International Accounting Standards Committee issued InternationalAccounting Standard IAS 36 “Impairment of Assets” (which specifies arecoverable amount test) in June 1998. It applies to a broader range of assetsthan non-current assets, and its requirements are considerably more detailedthan those set out in this Standard.The Australian Accounting Standards Board and the Public SectorAccounting Standards Board have developed Exposure Draft ED 99“Impairment of Assets” (issued for comment in December 1999), taking intoaccount the requirements of IAS 36. The Standard developed from ED 99would replace this Standard. The Boards have proposed in ED 99 that usingundiscounted cash flows to measure recoverable amount should beprohibited, consistent with IAS 36.Conformity with New Zealand AccountingStandardsNo accounting standard dealing specifically with the application of therecoverable amount test to non-current assets, or corresponding to IAS 36“Impairment of Assets”, has been issued in New Zealand. AASB 101022BACKGROUND TO REVISIONThis section does not form part of the Standard. It is a summary of thereasons for the current revision of the Standard.1The Standard includes the requirements concerning the recoverableamount test for non-current assets set out in Accounting StandardAASB 1010 “Accounting for the Revaluation of Non-CurrentAssets” as issued in June 1996. It coincides with, and is issuedsolely to facilitate the issue of, Accounting Standard AASB 1041“Revaluation of Non-Current Assets” based on the proposals inExposure Draft ED 92 “Revaluation of Non-Current Assets”The Australian Accounting Standards Board and the Public SectorAccounting Standards Board have included the recoverable amounttest in a separate Standard from AASB 1041:(a)because the recoverable amount test is applicable tonn-current assets measured on the cost basis; and(b)to avoid the need to reissue AASB 1041 when therequirements for the recoverable amount test are amendedas a result of the Boards’ IASC harmonisation project onImpairment of Assets.Principal Changes from the Previous Standard3The Standard uses the term “recoverable amount write-down” ratherthan “revaluation decrement” to describe the entry to write down ann-current asset’s carrying amount to its recoverable amount,because AASB 1041 defines “” as “the act of recognisinga reassessment of the carrying amount of a non-current asset to itsfair value as at a particular date, but excludes recoverable amountwrite-downs. This amended definition of “” reflects therequirement in AASB 1041 that when non-current assets arerevalued, they are revalued to their fair values.4The scope of the revised AASB 1010 is restricted to non-currentassets measured on the cost basis (which includes the “deemed cost”basis as described in the Main Features of the Standard).AASB 1041 permits classes of non-current assets to be measured onthe cost basis or the fair value basis, and non-current assets carried atfair value cannot be overstated. Because the scope of the revisedAASB 1010 is restricted to non-current assets measured on the costbasis, the Standard requires recoverable amount write-downs to berecognised as expenses in net profit or loss. The previous Standard AASB 101023(which applied to non-current assets measured on the cost basis or arevaluation basis) required recoverable amount write-downs to bedebited to the balance of the asset revaluation reserve in respect ofthe same class of non-current assets, to the extent of any existingcredit balance in the reserve in respect of that class, with anyremainder recognised as an expense in net profit or loss.5The Standard includes new commentary clarifying that, where netcash flows are discounted to their present value when measuring therecoverable amount of non-current assets, meeting the requirement(retained from the superseded Standard) to disclose the assumptionsmade in respect of the assets’ recoverable amount includesdisclosing the discount rate used.