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International Financial Reporting

   

Added on  2020-05-16

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ACCOUNTING AccountingName of the Student:Name of the University:Authors Note:
International Financial Reporting_1

ACCOUNTING Table of ContentsAnswer to question 1..................................................................................................................2Answer to Question 2.................................................................................................................4a).............................................................................................................................................4b)............................................................................................................................................4Answer to Question 3.................................................................................................................5a).............................................................................................................................................5b)............................................................................................................................................5C)............................................................................................................................................6a).............................................................................................................................................7b)............................................................................................................................................7Reference....................................................................................................................................9
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ACCOUNTING Answer to question 1. The Amortisation of goodwill is one of the many concepts which though old have notlost their significance with respect to their applicability and relevance. It is specificallyimportant due to the fact that many organisations need to amortise their amount of goodwillover its life on a straight line basis. The life of goodwill involves significant estimate as wellas assumptions on the part of the management. This makes it both difficult and subjective atthe same time. Use of estimate and assumptions become important because it is notreasonably possible to state the accurate amount of goodwill. Due to the fact that the amountof goodwill is an estimate made by the entity its recording and corresponding amortisationdoesn’t provide the shareholders with any relevant or crucial information that is the reflectionof the economic performance and position of the company (Titman et al. 2017). Recognisingthis matter the International Accounting Standard Board (IASB) has rightly stated that it willno longer be compulsory for the companies to ascertain the useful life of the goodwill for thepurpose of amortising it over its useful life using the straight line method. In pursuance ofthis the International Financial Reporting Standard (IFRS) 3 has clearly prescribed that it isno longer compulsory for the companies to amortise the goodwill over its useful life. Itconcluded that amortising same amount of goodwill over the years will be unable to provideany useful information to the shareholders as this is a redundant process. In comparison to that the method of impairment testing is more scientific andjustifiable in terms of ascertaining the current value in use and the net realisable value of thenon-current assets. It is due to the fact that via this method it is possible to ascertain the actualbenefit or the revenue generating capability off the asset that is accruing to the entity. Thisenables the financial statements of the entity to give a more realistic and true and fair view ofthe entity’s financial position and financial performance. The same method shall be appliedwith respect to goodwill in order to ascertain the actual value of the goodwill that should be
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