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HA 3011 Assignment AFA Advanced Financial Accounting

   

Added on  2020-05-28

13 Pages2574 Words85 Views
Running head: ADVANCED FINANCIAL ACCOUNTINGAdvanced financial accountingName of the universityName of the studentAuthors note

1ADVANCED FINANCIAL ACCOUNTINGTable of ContentsAssessment Task Part A:.................................................................................................................2Requirement i).................................................................................................................................2Requirement ii)................................................................................................................................2Requirement iii)...............................................................................................................................2Requirement iv)...............................................................................................................................3Requirement v)................................................................................................................................3Requirement vi)...............................................................................................................................4Requirement vii)..............................................................................................................................4Requirement viii).............................................................................................................................5Assessment Task Part B:.................................................................................................................5Requirement i).................................................................................................................................5Requirement ii)................................................................................................................................6Requirement iii)...............................................................................................................................7Requirement iv)...............................................................................................................................7Requirement v)................................................................................................................................8References list:...............................................................................................................................10

2ADVANCED FINANCIAL ACCOUNTINGAssessment Task Part A: Requirement i)At each report date, Virgin Australia has assessed financial assets for impairment and it isindicated by objective evidence that estimated future cash flow generated from assets arenegatively impacted by occurrence of any loss events. Assets having finite useful lives are testedfor impairment whenever there is an indication that assets might be impaired and it is doneannually. The management for estimating the impairment value requires significant judgment.Virgin Australia has recognized impairment in relation to maintenance reserve deposits ofamount $ 28.5 million. Impairment loss has been recognized on assets of amount 118.1 millionthat is associated with lease contracts (virginaustralia.com 2018).Requirement ii)Organization performs impairment testing on annual basis for determining if theimpairment loss is generated and potential impacts through sensitivity analysis. At eachreporting date, the group does assessment whether there is any indication that assets requiresimpairment. Recoverable amount of assets is estimated when there is requirement of conductingannual impairment testing. Inflow us nit generated by assets when recoverable amount of assetsare higher than assets. A cash-generating unit or an asset is considered impaired when theirrecoverable amount is less than the carrying amount and after impairment, amount is writtendown to its recoverable amount (virginaustralia.com 2018). Judgment is required fordetermination of cash generating unit, regarding the way operations is monitored bymanagement.

3ADVANCED FINANCIAL ACCOUNTINGCarrying value of intangible assets and goodwill is allocated to each cash-generating unitand there is no amortization of these balances and this result in impairment loss risks.Determination of Cash generating unit is based on calculations of value in use. Financial budgetsform the basis of estimating future cash flow that is approved by senior management. Requirement iii) In the current reporting year, Virgin Australia airlines holding has recorded impairmentexpenses on assets that are classified as held for sales and impairment losses on other assets.Impairment assets on other assets are reported at $ 118.1 million and impairment losses on assetsthat are classified as held for sale is reported at $ 107.3 million. Impairment loss in relation tointangible assets is recorded at $ 4.6 million (virginaustralia.com 2018). Requirement iv) The calculation of impairment is done as the difference between present value ofestimated future cash flows and the carrying value of assets. Future cash flow is estimated at bydiscounting at original effective interest rate of asset. Varying amount of assets and liabilities hasthe possibility of carrying significant risks in light of assumptions that are made by managementand are likely to make material adjustments. Virgin Australia is required to use estimates that arebased on assumptions for calculation of unearned revenue. Historical trend of financial liabilities

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