The joint submission from CA ANZ and CPA Australia expressed concerns relating to the introduction of current operational value (COV) as a fair value measurement basis for inventories and intangible assets. Our previous submission on this topic did not support the proposal to introduce COV as an additional measurement basis, in response to difficulties encountered when valuing assets held for their operational capacity.

Initially, the IPSASB introduced COV as a measurement basis for property, plant and equipment which are held primarily for their operational capacity. Since then, the IPSASB decided to extend the application of COV to other types of assets for which the reasons are not clear. For example, we are not aware of any accounting measurement concerns relating to inventories that would need the application of COV. In relation to intangible assets, we do not support the COV measurement basis for intangible assets held for their operating capacity, because it requires significant judgement, introduces inconsistencies, and may not faithfully represent the asset’s service potential.

Additionally, we expressed concerns about replacing the value-in-use (VIU) measurement for non-cash generating assets with the COV measurement basis in the definition of recoverable service amount for the impairment test. Our concern is that this change has not been introduced through a project specific to IPSAS 21 Impairment of Non-Cash Generating Assets. Consequently, stakeholders are not fully considering the proposed change or its impact within the context of IPSAS 21, which we consider is important.

Since IPSAS 46 includes COV as a measurement basis, we recommend that field testing is undertaken to assess the impact before the IPSASB adopts the COV measurement basis for other standards/assets.

Finally, we note that the existing guidance in IPSAS 46 may not adequately support the application of the COV measurement basis. We, therefore, recommend the inclusion of application guidance including practical expedients in certain situations to address practical concerns.