logo

Corporate Accounting, Reporting Assignment

6 Pages1465 Words125 Views
   

Added on  2020-04-01

Corporate Accounting, Reporting Assignment

   Added on 2020-04-01

ShareRelated Documents
ACCOUNTING AND REPORTING 1CORPORATE ACCOUNTING AND REPORTINGBy Student’s NameCode+ course nameProfessor’s nameUniversity nameCity, StateDate
Corporate Accounting, Reporting Assignment_1
ACCOUNTING AND REPORTING 2Recognition and measurement of an impairment loss for an individual assetThe recently experienced economic and financial uncertainties have brought asset impairment to the spotlight. Many companies are now focused on reassessing asset impairment as stipulated by the IAS 36 on Impairment of Assets. An asset is consideredto be overvalued if its current value exceeds the amount to be recovered from its sales or use. The IAS 36 standard address when it is necessary to conduct an impairment test, how to conduct it and ways in which impairment losses can be recognized. This paper examines a step by step analysis on how impairment test can be conducted for the first time by the IAS 36 (Brown & Tarca, 2005, p. 16). Key principles and requirements for ImpairmentAccording to the IAS 36, impairment test should be conducted on both the tangible and intangible assets. Impairment test seeks to ensure that the price of an asset is equivalent to its recoverable value. To fulfill this objective, companies are required to test all their assets for impairment as far as impairment indicators exist. In the same manner, test for impairment should be conducted on a yearly basis for intangible assets and goodwill (AASB, 2009). However, some assets such as inventories, assets generated from construction contracts, deferred tax assets, employee benefit assets, financial assets listed under IAS 39, non-current assets, and investment property are excluded from a test of impairment (Beatty, A & Weber, 2006, pp. 257-63). Note: the recoverable value is calculated as the higher of Fair value less disposable cost or Value in use.
Corporate Accounting, Reporting Assignment_2
ACCOUNTING AND REPORTING 3IAS 36 – Recognizing and Measuring an Impairment Loss for an Individual AssetFor an individual asset, an impairment loss is realized by the carrying amount is higher than the recoverable amount. The carrying amount refers to the value of an asset less amortization (accumulated depreciation) and accumulated impairment losses if any. Theimpairment loss is referred to the difference between the two amounts. This type of loss is treated immediately as a profit or loss unless there a revaluation of the same asset under another accounting standard (IAS 16) other than the IAS 36 (Niven, 2011, p. 37). It proves difficult to assess whether or not impairment of an individual asset because thecash inflow from a single asset cannot be independently identified and separated from that of other assets. Therefore, impairment recognition and measurement of assets are done collectively at the Cash-generating unit (CGU) level (Hilton & O’Brien, 2009, p. 183). The CGU is defined as the recognizable unit of assets that generates largely independent cash inflows from other assets. Notably, the CGU should comprise of consistent assets whose values can be determined from time to time. Recognizing impaired assetsAt the end of a financial year, a company is required, under IAS 36, to evaluate where there are impairment indicators on its assets. Test of impairment must be conducted on goodwill, intangible asset (not in use) and indefinite life intangible assets regardless of the existence of impairment indicators (Gaffikin, et al., 2003, p. 79). Indicators of impairment can be found from either internal or external sources of information. Internal indicators comprise of obsolete assets or those with physical damages, adverse changes of assets usefulness, the adverse economic performance of
Corporate Accounting, Reporting Assignment_3

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Recognition and Disclosure of Impairment of Assets in Financial Reporting
|14
|3565
|397

Impairment loss on Cash generating Units excluding goodwill
|4
|1261
|393

Corporate Accounting Assignment | Reporting Assignment
|9
|2003
|36

Impairment loss for cash generating units including goodwill
|6
|1462
|114

IAS 36 — Impairment of Assets PDF
|4
|1301
|145

(pdf) Corporate Accounting Assignment Sample
|6
|1554
|20