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ACC204 Corporate Accounting Assignment | Financial Reporting Assignment

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ACC204 Impairment accounting assignment (ACC204)

   

Added on  2020-05-28

ACC204 Corporate Accounting Assignment | Financial Reporting Assignment

   

ACC204 Impairment accounting assignment (ACC204)

   Added on 2020-05-28

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Running head: CORPORATE ACCOUNTING AND FINANCIAL REPORTING Corporate Accounting and Financial ReportingName of the StudentName of the UniversityAuthor Note
ACC204 Corporate Accounting Assignment | Financial Reporting Assignment_1
1CORPORATE ACCOUNTING AND FINANCIAL REPORTING Part A: Calculation of Recoverable value, value in use, Fair value less cost ofdisposal According to the assertions of the AASB 136, impaired assets of a company arethose assets whose real market valuation is found to be less than the value of thesame, which is recorded in the balance sheet of the company in consideration. In caseof presence of impairment in any asset of a company, the carrying amount of the sameis observed to be greater than the recoverable value of the same (AASB 2014). If thereare indications of the presence of impairment in any asset of a company, then theconcerned company needs to assess the amount recoverable amount of that particularasset to find out whether impairment is present or not. The impairment tests on theassets of the company are usually carried out at the end of each period of reporting.However, with the presence of indications of impairment in any asset, the test can becarried out more frequently by the concerned company (Rennekamp, Rupar andSeybert 2014). The companies need to carry the test on their intangible assets without anydefinite useful life or on those intangible assets, which are not yet available for the samepurpose. Impairment test can be carried out by the company on an asset at any point oftime within one accounting year, provided the company performs the test on the sameasset at the same time in each of the following accounting years (Bond, Govendir andWells 2016). For the performance of the test for impairment, it is to of crucial importanceto estimate the recoverable amount, value in use and the fair value less the disposalcost of the concerned asset properly, which is discussed in the following sections of theessay.
ACC204 Corporate Accounting Assignment | Financial Reporting Assignment_2
2CORPORATE ACCOUNTING AND FINANCIAL REPORTING Measuring recoverable amount of assets The recoverable value of an asset or a cash-generating unit can be defined asthe higher one among the value in use and the fair value less selling cost of theconcerned asset or CGU. As per Para 19-57, the rules of estimating the recoverablevalue is same for an individual asset or a CGU. If any of the value in use and the fairvalue less selling cost of an asset or a CGU is above the carrying amount of the same,then the asset is concerned to be impaired (Amiraslani, Iatridis and Pope 2013). In suchcases, there remains no necessity to estimate the value of both the fair value lessdisposal cost and the value in use of the same. If however, the estimate of fair value isnot possible, due to the lack of the basis for reliable estimation of the amount, then thecompany can take the value of the asset or CGU in use as the recoverable amount ofthe same. If there is no indication of the value in use of any asset or CGU exceeding the fairvalue less disposal cost, then the latter can be considered as the recoverable amount,which may often be relevant for assets, which are for disposal. If the assets concernedgenerate cash inflows which are mostly not dependant on the inflows from other assetsor asset groups, then the recoverable amount for the concerned assets are estimatedfrom the CGU containing the same asset (Guthrie and Pang 2013). However, this isdone if the fair value less disposal cost of the asset is higher than the carrying amountof the same or the value in use is close to the fair value less selling cost of the asset. As per the Para 10 of the AASB 136, for an intangible asset with no definiteuseful life, the test for impairment has to be conducted annually and it has to be done
ACC204 Corporate Accounting Assignment | Financial Reporting Assignment_3

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