Assignment Financial Statements
Added on 2020-05-28
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ANSWER TO PART APart (i)As per notes to the financial statements of the Company – Perpetual Limited of the year endingthirtieth of June two thousand and seventeen, following have been identified for which thecompany has undergone the test for impairment and accordingly impairment charges or loss havebeen recorded: Receivables – Receivables includes the amount which is due from the sundry debtors andother receivables. Noncurrent assets mainly including Property Plant and Equipment which comprises ofPlant and Equipment, Leasehold Improvements and Project Work in Progress.Intangible asset - Goodwill of the company Intangibles comprising of customer contracts, capitalized software, and project work inprogress and including those intangibles which acquired by the company duringtheacquisition of other companies. Assets carrying the financial risk. Part (ii)The testing of impairment has been done by the company as specified in the annual report of thecompany. The company has followed the Australian accounting standard 136 and 139 dealingwith the impairment of assets and the financial instruments – recognition and measurement.The company has mentioned in the notes to accounts that the assets grouped under the headproperty plant and equipment is tested for the impairment when it is required or when it isprobable that the particular asset might have got impaired. The test for the impairment has beenconducted on a yearly basis and generally at the end of the financial year. Like 30th of June 2017or 31st December 2017. While conducting the impairment test, the two figures of all the assetswithin the group – Property plant and equipment are calculated and then compared. These two1
figures are recoverable amount and the amount at which the assets are being carried on thebalance sheet date. Recoverable amount is defined as the value which is higher of the following:-Value in Use – Under this amount the present value of all the estimated cash flows iscalculated using the discount rate equivalent to the cost of capital. The estimated cashflows also include the amount of the residual value of the asset. -Net Selling Price – It is equivalent to the amount which the company will receive onselling that particular asset and the amount will be the net off the expenditures. In case the carrying amount is stated in the financial statements above the recoverable amount,then the impairment is made and accordingly charged to the statement of profit and loss anddeducted from the value of the particular asset.For the purpose of the impairment testing of the goodwill, the company has identified three cashgenerating units namely:-Perpetual Private-Perpetual Corporate Trust-Australian Equities (Perpetual Investments) (AASB, 2016)For the purpose of the non financial assets, the company has identified cash generating units forthe purpose of impairment testing.Part (iii)As per the annual report of the company for the period ending 30th of June 2017, the companyhas charged the impairment to the consolidated profit and loss account. In accordance with theparagraphs of the accounting standard, in case there is difference between the recoverableamount and carrying amount then the impairment is charged to the profit and loss account andthe assets account has been deducted with the value of the impairment so charged. The amountwhich has been recorded as the impairment for the year in the financial statements is mentionedbelow:2
S. No.Name of AssetsImpairment (In $)1Impairment Of Assets12000The above amount has been grouped under the head of the expenses as mentioned in theconsolidated statement of the profit and loss account. The detail of the expenses from where theimpairment has been obtained is given in Note number 1.3 of the financial statements of thecompany. Part (iv)The company has done the impairment testing in terms of the accounting standards and hasfollowed the guidelines and the procedures as prescribed. The major key estimates and therelated assumption which have been followed by the company for the purpose of testing ofimpairment are as follows:In the significant accounting policy, the company has mentioned that the impairmenttesting shall be done periodically and mostly on the date of the balance sheet. In the impairment testing, the company will identify the cash generating units for eachclass of assets where the individual assets are not capable of generating the cash flows inthe future on its own. The future cash flows are estimated on the basis of the past experience and the marketconditions. The discounting rate used is equal to the cost of capital and where the recoverableamount comes high with the same discounting rate then the recoverable amount isrecalculated after changing the discounting rate as done in the annual report of thecompany from 15.9% to 18.2%. The second impairment testing is used in the case of the goodwill where the cashgenerating units are identified and accordingly the cash flows are estimated and therecoverable amount is achieved. At the end of the calculation and the comparison of therecoverable amount with the carrying amount, it has been mentioned that there is no needof impairment because of the equivalent amount. The detail of the same is given below:3
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