Corporate Accounting

This document provides study material and solved assignments on Corporate Accounting. It includes answers to questions related to impairment testing, revaluation of assets, and more. The document also discusses the effects of impairment on financial statements and provides examples from Myer Ltd's annual report.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
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Name of the University:
Author’s Note:

1CORPORATE ACCOUNTING
Table of Contents
Part – I..............................................................................................................................................2
Answer to question 1:..................................................................................................................2
Sub part (a):.............................................................................................................................2
Sub part (b):.............................................................................................................................2
Answer to question 2:..................................................................................................................3
Answer to question 3:..................................................................................................................4
Sub part (a):.............................................................................................................................4
Sub part (b):.............................................................................................................................5
Sub part (c):.............................................................................................................................5
Sub part (d):.............................................................................................................................6
Answer to question 4:..................................................................................................................9
Part –II...........................................................................................................................................10
Sub part 1:..................................................................................................................................10
Sub part 2:..................................................................................................................................10
Sub part 3:..................................................................................................................................10
Sub part 4:..................................................................................................................................11
Sub part 5:..................................................................................................................................11
Sub part 6:..................................................................................................................................11

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Bibliography:.................................................................................................................................12
Part – I
Answer to question 1:
Sub part (a):
Sub part (b):

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Answer to question 2:

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Answer to question 3:
Sub part (a):

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Sub part (b):
Sub part (c):

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Sub part (d):

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Answer to question 4:

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Part –II
Sub part 1:
Impairment testing is the method of ascertaining the value of assets as on a particular
date. In this process the actual value or the true value of an asset can be determined and reported
in the financial statement. Assets and liabilities are recorded in the books of accounts at the
historical cost on the date of transaction. Due to inflation or changes in other parameters the
value of assets might not remain the same as it is recorded in the books of accounts. Hence, to
ascertain the true value of an asset and to show the true financial position of a business the
impairment of assets is necessary (Devalle and Rizzato 2017).
Sub part 2:
When conducting an impairment test for revaluation of assets in the books of accounts of
any business, the net increase or decrease in the value of asset is ascertained. If there is a net
increase in the value of assets, then it is considered as an impairment gain or revaluation surplus.
On the other hand, if there is a net decrease in the value of assets, it is considered as the
impairment loss or a loss on revaluation of assets. The effects of such increase or decrease in the
value of assets are given in both the respective asset account and the equity account. The
resultant loss or gain on impairment impacts the profit and loss statement or the equity of the
business and on the other hand, the increase or decrease in the value of assets causes a change in
the balance sheet items (Devalle and Rizzato 2017).
Sub part 3:
In the 2018 annual report of Myer Ltd the value of goodwill is presented and it can be
observed from there that, the value of good will as on 29th July 2017 was $492.13million and it

11CORPORATE ACCOUNTING
has decreased to $465.03million on 29th July 2018. It can also be observed that they had
conducted an impairment test for the amortization of value of goodwill and they have duly
amortized $27.09 million to the value of goodwill in the year 2017-18. Therefore, the decrease in
the value of goodwill was only because of such amortization.
Sub part 4:
They have reported some other amortization of assets in their 2018 annual report. It can
be observed that in the year 2017-18 there are some more amortization in the value of Brand
Name, Trademarks, Software, and Exchange differences.
Sub part 5:
At the time of conducting an impairment test for revaluation of assets to its fair value, a
discount rate is considered for discounting the future expected economic benefits of an asset.
Higher the discount rate the lower would be the present value of assets and lower the discount
rate is taken, higher would be the present value of assets. Hence, there is a direct impact of
changes in discount rate in revaluation of assets through impairment testing. Therefore, the
discount rate must be selected consciously for a better result of impairment testing (Sinclair and
Keller 2014).
Sub part 6:
IAS 36 prohibits the reversal of impairment of assts. It implies if the value of assets is
impaired and the necessary effects are recorded in the books of accounts, then that effect cannot
be revised or reversed in the books of accounts (Bond, Govendir and Wells 2016).

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Bibliography:
Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairments by Australian
firms and whether they were impacted by AASB 136. Accounting & Finance, 56(1), pp.259-288.
Devalle, A. and Rizzato, F., 2017. IFRS 3, IAS 36 and disclosure: The determinants of the
quality of Disclosure. GSTF Journal on Business Review (GBR), 2(4).
Linnenluecke, M.K., Birt, J., Lyon, J. and Sidhu, B.K., 2015. Planetary boundaries: implications
for asset impairment. Accounting & Finance, 55(4), pp.911-929.
Sinclair, R.N. and Keller, K.L., 2014. A case for brands as assets: Acquired and internally
developed. Journal of Brand Management, 21(4), pp.286-302.