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Corporate Accounting and Reporting | Assignment

   

Added on  2020-04-01

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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:
Corporate Accounting and Reporting | Assignment_1

1CORPORATE ACCOUNTING AND REPORTINGReversal of impairment loss for cash-generating units:One of the major accounting principles is that excessively valued assets need notbe present in the balance sheet statement. As a result, it requires some conceptsrelated to value in opposition to which the carrying amount of the asset could becompared to determine whether it is excessive. According to “Paragraph 1 of AASB136”, the impairment of asset would explain the methods that each organisation needsto adopt for assuring that the asset carrying amount does not exceed the recoverableasset amount. Moreover, according to the above-stated paragraph, assets are carried atamounts, which exceed their overall recoverable amounts, if the amount expected to berecovered from asset sale is lower compared to the carrying amount (AASB 2015). Insuch case, the assets could be described as impaired and along with this, standardrequires the company to recognise losses of impairment and time related reversal ofimpairment and compulsory disclosures. There is realisation of impairment loss, in case; the asset carrying value isgreater compared to the recoverable amount, which is greater of the fair asset valueminus value in use and cost to sell. “Paragraph 59 of AASB 136” states that if thecarrying value of the asset is greater in contrast to its recoverable amount, the formerwould be reduced to its latter. Such reduction would be considered as impairment loss(Accounting, Part and Plans 2015). However, the procedure of recording impairmentloss would change depending on the pursuance of the asset to the revaluation model orrecorded at cost. As per “Paragraph 60 of AASB 136”, the impairment loss recognitionis required to be carried out urgently, until the asset carrying amount is conducted at re-
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2CORPORATE ACCOUNTING AND REPORTINGvalued amount according to the other standard. This yardstick would represent therevaluation model in AASB 116. Hence, the loss of impairment related to a re-valuedasset is required to be considered as decrease in revaluation in compliance with theother yardstick. The assets could be impaired with the help of two methods and these methodstake into account the revaluation model and the cost model. Based on the cost modeland “Paragraph 61 of AASB 136”, the realisation of loss related to impairment isrequired to be carried out instantly in gain or loss at the time cost is utilised for recordingany impaired asset. This signifies that there needs to be realisation of loss as expensein the income statement of the organisation (Boennen and Glaum 2014).As per the model of revaluation and “Paragraph 60 of AASB 136”, at the time ofcarrying impaired asset like “property, plant and equipment” at re-valued amount, thetreatment associated with impairment loss is identical to decrease in revaluation. Inorder to reiterate, the impairment loss associated with re-valued asset is recognised inincome statement in the primary phase. This would help in assuring that such amountdoes not exceed the account pertaining to revaluation surplus for the same asset(Detzen et al. 2016). The objective is achieved by debiting the account of remainingrevaluation surplus, which is applicable to the asset and the deferred tax liability beforeany loss balance is recognised in the form of expense in the income statement. However, some instances might be present, in which the recoverable amount ofwritten down asset in past exceeds the carrying value of the asset (Kabir and Rahman2016). As per “Paragraph 110 of AASB 136”, a firm is required to locate any indication
Corporate Accounting and Reporting | Assignment_3

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