IFRS Transition in The Republic of Uzbekistan: An Analytical Perspective on PP&E Impairment
About this article
Keywords:
IFRS Adoption; Impairment Tests; Impairment Reversal, Value in Use; Cash-Generating Unit; Uzbekistan; IAS 36Abstract
This study examines asset revaluation and impairment under International Financial Reporting Standards (IFRS), with a focus on Uzbekistan's first-time adoption. Specifically, it focuses on the implementation of first-time value-in-use-based impairment tests for PP&E assets.
To address the development gap for highly-granular automated impairment and reversal algorithms identified in the accounting operations literature, we develop a dynamic discrete-period technique for impairment and reversal transformations of assets’ costs that efficiently discriminates for the commissionings and disposals in PP&E inventory over the standard two-year IFRS transition period. The case study application of this algorithm finds evidence to indicate successful-performing automated impairment and reversal allocations at the level of individual PP&E assets in the stress-test-like context of Covid-era-associated high volatilities in values-in-use for the transitioning entity. It is shown that the proposed algorithm effectively safeguards against the over-reversal of impairments, ensuring full compliance with IAS 36’s paragraph 117 requirements.
The findings will extend the accounting literature related to developing impairment and reversal algorithms of high granularity. In practical terms, the findings will also contribute to the literature on first-time IFRS adoption by highlighting the intricacies of asset revaluation and impairment in IFRS transitional contexts confronted by developing countries, specifically Uzbekistan’s unique IFRS transitional context, wherein large state-controlled entities underwent IFRS transition amid the COVID pandemic, necessitating drastic initial impairments followed by partial reversals as economic conditions improved. The description of this experience can be of value in similar transitional contexts.
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