PART A Question 1Impairment takes place when the business ensures that the assets are carrying not more than therecoverable price (Huikku, Mouritsen and Silvola, 2017). In Service Stream Limited, thecompany applies impairment testing on various assets. These include goodwill which is asignificant asset for any company, inventories which are termed as the lowest of all the cost andnet realizable value and financial assets which include financial liabilities and instrument ofequity (Annual report of Service Stream Limited. 2017)Question 2For the objective of impairment testing the goodwill of the company is allocated to each of theunits or groups which generate cash. All these units and groups which generate cash are thentested annually for the impairment. Further, if the recoverable sum of such units is less than thecarrying sum the loss of impairment is allocated, then it is mandatory to decrease the carryingsum followed by a pro rata in the units (Kabir and Rahman, 2016). Further for the impairment ofthe intangible excluding goodwill and tangible assets, the company reviews the total carryingassets to identify any indication which states the impairment loss. Question 3By the annual report of the company; impairment losses are recorded in the section of "totaloperating expenses" present in an income statement thereby net income of organisation isdecreasing (Wen and Moehrle, 2015). It is also known asan impairment charge. However, ittakes place when a corporate writes-off goods or assets that it assess as damaged, unworthy, orunusable. Despite a P&L statement, an impairment loss impacts other financial informationabstracts; it is another name given by accountants to the financial report (Sandell and et al.,2017). Asset’s value impairment generates a fall in the statement of shareholder’s equity change,as high expenses and reduced income impacts the retained earnings account is an item of equitystatement. Moreover, Low value of asset produces a numerical dent in the balance sheet ofcorporate, particularly in the section of total resources.
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