There are 2 main issues with impairments currently:
(1) We need to amend how we currently record impairment depreciation to cater for changes in the lease term e.g., as a result of contractions or extension of the lease term post impairment, as currently the reporting suffers from timing differences rendering the reporting of impairments inaccurate where the original lease term has been amended. Replacing the current mechanism for spreading the impairment depreciation with a similar approach we take to spread dismantling accretion as the source of impairment depreciation would alleviate this issue. Note: We would have to adapt the approach though to retain the multiple impairment strands as each impairment may have it's own blended depreciation rate.
(2) We need to separate the impairment charge from the ROU asset cost movement and display as a separate item (Impairment provision) in the asset schedule. This should allow the ROU asset cost and depreciation balances to be calculated excluding the impairment and separately account for the impairment as we do today in the reports. Displaying the impairment as a separate item from the ROU asset cost will then allow us to "transfer" the cumulative impairment movement from ROU asset cost to a separate "Impairment Provision" journal posting will give users the transparency they require and also avoid users having to manually Dr Impairment provisions and Cr ROU asset cost on termination.
