ACC204 Accounting Management Assignment
Added on - 28 May 2020
Showing pages 1 to 3 of 8 pages
Running head: CORPORATE ACCOUNTING AND FINANCIAL REPORTING (ACC204)Corporate Accounting and Financial ReportingName of the StudentName of the UniversityAuthor Note
1CORPORATE ACCOUNTING AND FINANCIAL REPORTINGPart A: Impairment Loss for the cash generating units (Excluding goodwill)The AASB 136 defines an asset of any company to be impaired if the valuerecorded of that asset in the company’s balance sheet is found to be greater than theactual market price of that specific asset. The written-down assets of a company areknown as the fixed assets and goodwill because the carrying value’s time spans forthose assets are larger for the purpose of impairment. If, however, a particular asset’scarrying amount is found to be larger than the asset’s value recoverable, then in thatcase that specific asset of the company is taken to be impaired (Bond, Govendir andWells 2016). Therefore, in the presence of symptoms of an asset to be impaired, theconcerned company needs to estimate the recoverable amount for that asset, for findingout impairment in the asset (if any present). Generally, the companies conduct the testof impairment on the concerned assets by estimating the amount recoverable for theassets at the end of the reporting periods. However, if there are strong indications ofpresence of impairment in assets, then the company can carry out the impairment testnot just annually, but more frequently (Rennekamp, Rupar and Seybert 2014).Irrespective of the presence of symptoms indicating impairments in assets, thecompanies need to test their intangible assets, which do not have a definite useful life,or their tangible assets, which are yet unavailable for the purpose of impairment. For aparticular asset, the concerned company at any point can carry out the impairment testwithin an accounting year. However, the company needs to perform the test on theasset consistently at the same time in each of the successive accounting years. Theremay be different times for impairment testing on different assets of the company.
2CORPORATE ACCOUNTING AND FINANCIAL REPORTINGThere remain several indications towards the presence of impairment of assets inthe company, the indicators being both external as well as internal (Corgnatiet al.2013). The internal indications include – a) physically damaged or obsolescent availableassets, b) evidences of changes which affect the companies adversely (these changesmainly include the presence of idle or restructured assets, disposal plans for the assetsprior to the end of their expected life, presence of idle assets and others). On the otherhand, the external indicators of impairments of a company’s assets include- a) thepresence of symptoms of considerable dynamics with potential negative impacts on theconcerned company, b) presence of assets with significantly decreased market valuethan the expected value, c) presence of increased return or interest rate, the rateincreasing considerably within a specific span of time, thereby having potentialimplications on the company’s discount rate, which in turn is used by the company forthe purpose of the estimations of the value of the assets (Johnson 2014).In general, the recoverable value of an asset is the higher value among theassets’ fair value less the disposal cost and the value in use of the same. The samenotion is also applicable not only for the individual assets but also for the cashgenerating units of the company. The estimation of the value of the asset is donethrough- a) the future expected time variations or the variations in the cash flow whichare anticipated to occur, b) the uncertainty cost, which is inherently included in theassets, c) future cash flow estimations which the company expects to generate, d) otherexogenous determinants like the market participation, market liquidity and the expectedcash flows in the future for the company (Guthrie and Pang 2013).