Philippine Public Sector Accounting Standards 26

IMPAIRMENT OF CASH GENERATING ASSETSTable of ContentsPAG Number

BACKGROUND

INTRODUCTION TO THE IPSAS 26

PHILIPPINE APPLICATION GUIDANCE TO IPSAS 26

Scope1

Effective Date2

PHILIPPINE APPLICATION GUIDANCE TO IPSAS 26Impairment of Cash Generating Assets

Background

This Philippine Public Sector Accounting Standard (PPSAS) 26 consists of International Public Sector Accounting Standard (IPSAS) 26, Impairment of Cash Generating Assets, and the Philippine Application Guidance (PAG) prepared to suit the Philippine public sector situation.

The IPSAS 26 was issued in February 2008 by the International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC). This includes amendments resulting from IPSASs issued up to January 15, 2012.The PAG (in italics) provides supplementary guidance on the proper implementation of IPSAS 26.

Introduction to the IPSAS 26IPSAS 26 provides that cash-generating assets are assets held with the primary objective of generating a commercial return. An asset generates a commercial return when it is deployed in a manner consistent with that adopted by a profit-oriented entity. Holding an asset to generate a commercial return indicates that an entity intends to (a) generate positive cash inflows from the asset (or from the cash-generating unit of which the asset is a part), and (b) earn a commercial return that reflects the risk involved in holding the asset.

This Standard sets out the procedures that an entity shall apply to determine whether a cash-generating asset is impaired, and to ensure that impairment losses are recognized. It also specifies when an entity shall reverse an impairment loss, and prescribes disclosures.

Philippine Application Guidance to IPSAS 26

Scope

PAG1. Paragraph 3 deals with the applicability of this Standard to all public sector entities other than Government Business Enterprises (GBEs). GBE is an entity that has all the following characteristics: (a) Is an entity with the power to contract in its own name; (b) Has been assigned the financial and operational authority to carry on a business; (c) Sells goods and services, in the normal course of its business, to other entities at a profit or full cost recovery; (d) Is not reliant on continuing government funding to be a going concern (other than purchases of outputs at arms length); and (e) Is controlled by a public sector entity. This standard shall be applied to all National Government Agencies (NGAs), Local Government Units (LGUs) and Government-Owned and/or Controlled Corporations (GOCCs) not considered as GBEs. Effective DatePAG2. This PPSAS shall apply for annual financial statements covering periods beginning January 1, 2014. PPSAS 26 - Impairment of Cash Generating Assets

January 2014

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