The IPSASB approves an Exposure Draft on the application of current operational value across IPSAS

COV as an applicable measurement basis

COV was added as an applicable measurement basis at initial and subsequent measurement for IPSAS 12 Inventories and IPSAS 31 Intangible Assets.

IPSAS 12 and IPSAS 31 propose amendments to reflect that COV is an applicable measurement basis:

• • at initial measurement for assets acquired in non-exchange transactions; and
  • at subsequent measurement for assets held for their operational capacity.

Amendments are also proposed to several IPSAS to replace the term ‘valuation techniques’ with ‘measurement techniques’ for consistency with the new terminology introduced in IPSAS 46.

Application of COV to impairment

The IPSASB determined that with the introduction of COV, the applicability of value in use for a non-cash generating asset is superseded by the measurement requirements in IPSAS 46. Amendments are proposed to IPSAS 21 Impairment for Non-Cash Generating Assets to:

• • Replace ‘value in use’ with ‘current operational value’. This results in a change in the definition of recoverable service amount which is amended to be the higher of a non-cash generating asset’s current operational value and its fair value less costs to sell. The revised definition of recoverable service amount is consistent with the main principle of impairment testing that the carrying amount of an asset should be written down to the higher of the value of the asset to the entity in operation (i.e. COV) or the amount for which the asset could be sold (i.e. fair value).
  • Remove the restoration cost and service units approaches. These approaches are not applicable to measuring COV. The measurement techniques applicable to COV are market approach and cost approach.

Amendments to accounting policies and accounting estimates

Amendments to IPSAS 3 Accounting Policies, Changes in Accounting Estimates and Errors are proposed to reflect that a change in measurement model (rather than a change in measurement basis) is a change in accounting policy. The measurement models applicable in IPSAS 46 are the historical cost model and the current value model.

The ED also proposes a change in the definition of accounting estimates in IPSAS 3. This change is aligned to the improvements made to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to provide clarity and to assist in the distinction between accounting policies and accounting estimates.

Consistency in disclosures

Amendments are proposed to enhance the consistency of current value measurement disclosure terminology across IPSAS.