Corporate Accounting - Assignment
Added on - 28 May 2020
Showing pages 1 to 3 of 7 pages
Running head: CORPORATE ACCOUNTINGCorporate accountingName of the universityName of the studentAuthors note
1CORPORATE ACCOUNTINGImpairment loss for cash generating units including goodwill:Introduction:The impairment reviewing of goodwill by organization is done at level of cashgenerating unit and the impairment testing of goodwill as per the IAS 136 are performedat level that does not exceed operating segments. Allocation of goodwill acquired inbusiness combination is done at cash generating unit. It is essential for organization toalter the composition of one or more acquired cash generating unit to which theallocation of goodwill as been done.One of the basic principles of impairment as per IAS 136 is that the carryingvalue of assets should not be more than their recoverable amount that is higher of valuein use and fair value of assets less costs. In this regard, it is required by entities to testsall the assets that are in the scope for potential impairment for goodwill and intangibleassets having indefinite useful lives. It is required by the standard that recognition of anyimpairment loss should be done as an expense in profit or loss that are carried out atcosts. Impairment loss is first recorded against revaluation gains that are recognizedpreviously if the revaluations of affected assets are done in accordance to IAS 16property, plant and equipment (Avallone and Quagli 2015). For the assets other thangoodwill, recognition of impairment loss in prior period is required to be reversed. Thisreversal should be done when there are any alterations in the estimates for determiningrecoverable amount of assets. There should be extensive disclosures regarding therecognition of impairment loss and carrying out impairment testing.
2CORPORATE ACCOUNTINGDiscussion:Recognition of loss related to impairment is done to the extent that assetsrecoverable amount is less than their carrying amount. Losses resulting fromimpairment for the assets that are carried historical costs are recognized immediately asan expense in the statement of profit and loss. If under IAS 16 or 38, recognition ofimpairment loss is done as a decrease in revaluation if the revalued assets are impairedassets. Such decrease in revaluation is immediately recognized in the comprehensiveincome. This has the impact in terms of declining value that reduces revaluation surplusof assets. Recognition of impairment loss is done immediately in the statement of profitand loss as an expense and this is done to the extent that revaluation surplus is lessthan impairment loss. Impaired assets carrying amount after the recognition ofimpairment loss will never be decreased to below the higher of recoverable amount ofindividual assets an zero (Chenet al.2014).When the group of cash generating unit (CGU) or a CGU where the allocation ofgoodwill done is tested for the purpose of impairment, then firstly allocation of lossarising from impairment is performed to reduce the carrying amount of goodwill.Allocation of any existed remaining loss is attributed on pro rata to the other assets ofCGU based on carrying amount each asset in CGU. Nonetheless, assets carrying valuein this regard is never reduced to below of higher of recoverable amount of individualassets and zero. Allocation of impairment loss for a group of CGU will have the identicalprocess as that of single CGU (Knauer and Wöhrmann 2016).Recognition of impairment loss for an asset other than goodwill is done bygathering information from external and internal sources and such loss have decreased