What does 44-49 require?

Future cash flows are projected for the asset as it stands today, not as it might be improved. They exclude the cost savings, benefits and outflows of any restructuring to which the entity is not yet committed (AASB 137 says when commitment exists; a restructuring is a management-controlled programme that materially changes the scope or conduct of the business), and they exclude outflows that would improve or enhance performance and the extra inflows those outflows would bring, until the outflows are actually incurred. Once committed, the entity's projections reflect the restructuring's savings and other benefits from the latest approved budgets, while the restructuring outflows sit in a provision under AASB 137. Outflows needed to maintain the current level of benefits are included, and where a unit or a single asset comprises parts with different lives that are all essential, replacing the shorter-lived parts counts as day-to-day servicing in the projections.

AASB 136 Impairment of Assets 44-49: Project cash flows...

Other controls in Measuring recoverable amount: fair value less disposal costs, value in use and the discount rate (paragraphs 18 to 57, Appendix A) – AASB 136 Impairment of Assets

18-23 Recoverable amount principles: it is the higher of fair value less disposal costs and value in use, only one needs measuring if it exceeds carrying amount, value in use may stand alone where fair value cannot be reliably measured and vice versa, and recoverable amount is measured per asset unless the asset's cash inflows are not largely independent, in which case per cash-generating unit
24 Carry forward the prior detailed recoverable amount calculation for an indefinite-life intangible only if its unit's assets and liabilities have not changed significantly, the prior calculation showed comfortable headroom over carrying amount, and events since make a shortfall remote
28-29 Costs of disposal: deduct incremental costs directly attributable to disposal (legal costs, stamp duty and similar taxes, removal costs, costs of readying the asset for sale) other than those already recognised as liabilities, but not termination benefits or post-disposal downsizing costs
30-32 Value in use: reflect the expected future cash flows, their possible variability, the time value of money at the current risk-free rate, the price of bearing the asset's uncertainty and other market factors including illiquidity, either within the cash flows or within the discount rate, so that the result is the expected present value
33-38 Basis for cash flow projections: use reasonable and supportable assumptions representing management's best estimate with more weight on external evidence, start from the latest approved budgets or forecasts for at most five years unless a longer period is justified, exclude uncommitted restructurings and enhancements, and extrapolate beyond the budget period at a flat or falling growth rate capped at the long-term average for the product, industry, country or market unless a higher rate is justified
39-43 Composition of cash flows: include the inflows earned while the asset stays in use, the directly attributable or reasonably allocated outflows needed to earn them (day-to-day servicing, attributable overheads and remaining costs to finish an incomplete asset), and net disposal proceeds at the end of useful life; keep inflation treatment consistent with the discount rate; exclude inflows from independent assets and outflows for recognised liabilities
50-54 Exclude financing cash flows and income tax from the projections, estimate end-of-life disposal proceeds on an arm's length basis using current prices for similar assets adjusted consistently for inflation, recognise that fair value ignores entity-specific synergies, rights and tax attributes, and estimate foreign currency cash flows in their own currency with a matching rate before translating at the spot rate
55-57,A15-A21 Discount rate: use a pre-tax rate reflecting the market's current pricing of money's time value and of asset-specific risks not already in the cash flows, derived from market rates for comparable assets or the cost of capital of a comparable listed entity, or from surrogates such as the entity's own cost of capital, incremental borrowing rate or other market rates adjusted for asset risk, country, currency and price risk and unaffected by the entity's capital structure

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MCP endpoint All AASB 136 Impairment of Assets controls