Brand impairment testing and compliance with mandatory Ind AS disclosures. The shifting from IGAAP to Ind AS has resulted in change in accounting for intangible assets, particularly for ‘Brand’. Earlier accounting standard on intangible assets (IGAAP AS-26) prescribes amortization of brand whereas new accounting standard (Ind AS-38) prescribes.

Transition from IGAAP to Ind-AS has resulted in change in treatment of ‘Brand’. IGAAP prescribe amortization, whereas Ind-AS prescribe amortization for brands with definite useful life and annual impairment testing for brands with indefinite useful life. The purpose of the current study is to provide evidence of the extent of compliance with respect to the disclosure requirements of brand impairment testing as per IndAS 36.

The remaining paper has following sections,

  • a. Estimates required for impairment testing
  • b. Disclosure requirement as per Ind-AS 36
  • c. Research methodology
  • d. Result and conclusion

a. Estimates required for impairment testing

As per Ind-AS 36 an asset is impaired when its carrying amount exceeds its recoverable amount. The carrying amount is the amount at which an asset is recognised after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. For impairment testing of brand, firm need to calculate the recoverable amount, for which it has to calculate fair value and its value in use. Current paper focus only on value in use and related estimates.

As defined by Ind-AS 36, value in use is the present value of the future cash flows expected to be derived from an asset or cash generating unit. For calculating value in use, firm has to make the following estimation

  • i. Remaining useful life
  • ii. Cash flow projections
  • iii. Discount rate

b. Disclosure requirement as per Ind-AS 36

As mentioned in above section firms need to estimate useful economic life, cash flow and discount rate to measure value in use, it is expected that a firm provides disclosure in its annual report about these estimates. In the absence of such disclosures readers will be clueless about the impairment testing method adopted. In the event of no impairment charge on brand, such disclosures become critical, as it will help readers to understand the economic rationale behind it.


For transparency Ind-AS 36, particularly para 134 to 137, has prescribed disclosure requirements with respect to estimates used to measure recoverable amounts of goodwill or intangible assets with indefinite useful life. Current study focus only on value in use estimates hence only requirements laid down in para 134 (d) (i)-(v) have been considered, which are described below –

  • i. Assumptions based on which cash flow projection are made
  • ii. Description of management’s approach to determining the values assigned to each key assumption
  • iii. Period for which cash flow projections are made
  • iv. Growth rate used in projecting cash flows
  • v. Discount rate applied to cash flow projection

c. Research methodology

Sampling methodology – firms were included in the sample upon fulfilment of following sampling requirements –

  • i. It should be a constituent firm of Nifty 500 index
  • ii. It should have reported brand & trademark as on March 31, 2017 under Ind-AS
  • iii. It should not have charged impairment and amortization on brand & trademark for the year 2017-18
  • iv. Its value of net brand & trademark as on March 31, 2017 should be 100 million or more

Following four firms satisfied all the above mentioned conditions –

  • i. Future Retail Ltd.
  • ii. Hindustan Unilever Ltd.
  • iii. Marico Ltd.
  • iv. Pidilite Industries Ltd

Data analysis – a five item disclosure index was prepared to study the extent of compliance with respect to the disclosure requirements laid down in para 134 (d) (i)-(v) of Ind-AS 36. Using the index, disclosure analysis was conducted for the sample firms. Disclosure score was calculated for sample firms with a score of one assigned to each item in the index.

d. Result and conclusion

Table-1 provides disclosure score of the sample firms based on disclosure analysis conducted using the index.

Only one firm provided all the necessary disclosures, remaining sample firms exhibited poor disclosure and scored zero in the test. Based on the study it appears that brand impairment testing disclosures needs to be improved.

Table 1: Disclosure score

FirmDisclosure ScoreNet Brand and Trademark (as on March 31, 2018)
Future Retail Ltd0? 1550.3 Million
Hindustan Unilever Ltd5? 3110 Million
Marico Ltd.0? 185.6 Million
Pidilite Industries Ltd.0? 1579.1 Million


  • i. Indian Accounting Standard (Ind AS) 36 Impairment of Assets
  • ii. Annual reports of sample firm for the year 2017-18


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