Advanced Financial Accounting - Assignment (pdf)

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Part A:..............................................................................................................................................2
Question (i):.................................................................................................................................2
Question (ii):................................................................................................................................3
Question (iii):...............................................................................................................................3
Question (iv):...............................................................................................................................5
Question (v):................................................................................................................................6
Question (vi):...............................................................................................................................6
Question (vii):..............................................................................................................................7
Question (viii):.............................................................................................................................7
Part B:..............................................................................................................................................8
Question (i):.................................................................................................................................8
Question (ii):................................................................................................................................8
Question (iii):...............................................................................................................................9
Question (iv):...............................................................................................................................9
Question (v):..............................................................................................................................10
References......................................................................................................................................11

2ADVANCED FINANCIAL ACCOUNTING
Part A:
The intention of the paper was to centre on impairment and supposition criteria
implemented with respect to Incitec Pivot Limited for carrying out impairment tests based on
assets. The paper has an objective of assorting process of impairment testing as well as related
subjectivity in the procedure. In order to elucidate such processes, the annual report of the
organization over the year end 30th June, 2015 was considered as this did not offer the annual
report over a predefined period. Incitec Pivot Limited is associated with production and
distribution of industrial explosives, fertilizers and industrial chemicals along with provision of
associated services. The organization has its business segments in America, Asia Pacific and
Corporate. The company produces ammonium phosphates and is a distributor of produced
fertilized goods to wholesalers within Australia and the export market (Incitecpivot 2018).
In addition, an asset is regarded as impaired if it has lesser market value in contrast to the
carrying value. The assets which are referred to be impaired are tangible and this encompasses
property, plant and equipment and goodwill which serve as an intangible asset. Once adjustments
are conducted with impaired asset relied on carrying amount, loss is recorded in the income
statement of the organization. At the time impairment is written off, these assets might have
lesser carrying cost for some adjustments are recorded to be loss that might lead to reduced asset
value (Hoskin, Fizzell and Cherry 2014).
Question (i):
In alignment with Incitec Pivot Limited Company’s annual report for the year 2015, the
impairment testing for certain classes of assets is conducted. Goodwill and the intangible assets
was not amortized devoid of the fact that these are evaluated in situations or instances which

3ADVANCED FINANCIAL ACCOUNTING
signifies that impairment of assets can be conducted in a situation where financial statements are
examined in annual reports with costs deducted from impaired accumulated loss (Beatty and
Liao 2014). These assets encompass plant, equipment and property as well as trade receivables
which experiences impairment testing in case where there is an indication on carrying amount of
assets which cannot be recovered.
Question (ii):
Incitec Pivot Limited implemented a two-step process in testing impairment. The initial
step greatly centered on fair value that is related with reporting unit as well as carrying value that
encompass the goodwill. In a case in which an operating unit’s carrying value is high in
comparison to fair value, the second step is related with conducting impairment test for
entertaining existence of impairment loss amount (Cortesi et al. 2015). This second step is
associated with implied fair value associated with reporting unit in consideration to carrying
amount of units. In a condition where there is a decrease in implied fair value in contrast to
carrying amount, some impairment charge existed in the amount linked with such excess.
Moreover, this realized loss cannot be more than carrying amount of the assets.
Question (iii):
The organization took into consideration the below mentioned impairment expenses over
the period ended on 30th June, 2015.
Intangible assets as well as goodwill:
With the passing years, the organization presented a total impairment of $61,223,000
($116,207,000 - $54984000), from which $20,033,000 was mentioned to be software charges,
$23,461,000 was mentioned for the consumer contracts and $6,829,000 is the record made in