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HA 3011 Report on Advanced Financial Accounting - Crane Group limited

   

Added on  2020-05-28

12 Pages2652 Words38 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)From the analysis of annual report of Crane Group limited, it can be seen that goodwillhas been subjected to an impairment test on annual basis and they are tested whenever there is anindication resulting from events and circumstances that it requires impairment. Any excessamount of goodwill should be written off in the period of determination. Over the useful life ofassets, amortizations of intangible assets are done. If change in status of impairment is indicatedby occurrence of any events and circumstances, then impairment testing is conducted byorganization more often than annually. Crane group limited also conducts impairment testingannually for intangible assets with indefinite useful lives and the potential for impairment isindicated by circumstances and events. Moreover, reviewing of definite lived intangible assetsare reviewed for impairment when there is indication that particular assets requires impairment.During the fourth year, annual impairment testing is performed by company. Company hasreviewed long-lived assets when it is indicated that particular assets carrying value cannot berecovered as depicted by circumstances and events (Cranegroup.com 2018). Requirement ii)The assessment of annual impairment is performed by organization by comparingrespective carrying value of assets with their fair value of reporting units. When the estimated netbook value of reporting unit is more than fair value is less than, goodwill is regarded to bepotentially impaired. Establishment of fair value is done by discounting future estimated cashflow at an estimated cost of capital. In the recent impairment assessment, cost of capitalconsidered for estimating future cash flow varied from 9% to 12%. Furthermore, organization

3ADVANCED FINANCIAL ACCOUNTINGhas applied hypothetical and reasonably possible 10% decrease in fair value for evaluating thesensitivity of calculations of fair value on the impairment testing of goodwill.Requirement iii) Crane group limited did not require impairment charges during financial year 2016, 2015and 2014. Requirement iv) Organization is required to make assumptions and estimates in light of certainaccounting policies adopted and this have an impact on reported amount of liabilities and assets.Assumptions involved some inherent uncertainties such as judgment of management in applyingthe analysis of goodwill impairment. Reasonable assumptions and estimates are made byorganization for calculating fair value of reporting units. Anticipated net increase or decrease incosts and current structure of costs forms the basis of assumption of profit margin(Cranegroup.com 2018). There is periodical reviewing of assumptions and estimates and theimpact of revisions are reflected in the financial statements.

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