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Goodwill Impairment Journal Entries

   

Added on  2020-04-07

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Running head: CORPORATE ACCOUNTING AND REPORTINGCorporate Accounting and ReportingName of the Student:Name of the University:Author’s Note:Course ID:
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1CORPORATE ACCOUNTING AND REPORTINGTable of ContentsAnswer to Part A:...............................................................................................................2Answer to Part B:...............................................................................................................5References:........................................................................................................................8
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2CORPORATE ACCOUNTING AND REPORTINGAnswer to Part A:According to “IAS 36 Impairment of Assets”, it is assured that an asset is notbrought on the balance sheet statement at a value, which is greater compared to therecoverable amount of the stated asset. This essay aims to focus on appraising thesituations in which there is occurrence of impairment loss along with explaining the timethe organisation needs to perform the impairment review of assets. As commented byBaboukardos and Rimmel (2014), impairment is expected to happen at the time thecarrying amount is greater in contrast to recoverable amount. The recoverable amountincludes the net sales price of the asset, value in use and fair value in compliance withIFRS 13. After the end of each reporting year, an organisation needs to assess whetherany indication of impairment is inherent or not. In case, there is an indication ofimpairment, it is necessary to compute the recoverable amount of the asset (Damian etal. 2014). The realisation of impairment loss is inherent, in which the recoverableamount is lower in contrast to the carrying amount. It needs to be realised immediatelyas expenditure, unless it associates with a re-valued asset, in which the impairment lossis considered as revaluation decrease. For goodwill, the cash-generating unit to whichgoodwill has been apportioned needs to be tested for annual impairment by contrastingthe unit’s carrying amount along with its recoverable amount. In either situation, if therecoverable amount of the unit is below its carrying amount, the organisation needs torealise impairment loss. In the past, IFRS needs realisation of goodwill subject toamortisation over the useful lifetime (Guthrie and Pang 2013).
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