Corporate Accounting: Computation of Recoverable Amount and Impairment Loss

Corporate accounting

TABLE OF CONTENTS
Introduction................................................................................................................................3
Part A.........................................................................................................................................3
Part B..........................................................................................................................................6
Conclusion..................................................................................................................................9
References................................................................................................................................10

Introduction
AASB 136 states the accounting provisions for the Impairment of Assets supported by
amendments incorporated by IAS 36 Impairment of Assets as provided by the IASB
(Kuzmina and Kozlovska, 2012). The present study provides descriptive evaluation for
computation of recoverable amount, the value in use and fair value of asset by rducing cost of
disposable by considering relevant subsections. The study further incorporates journal entries
for recording impairment loss of cash generating unit by considering appropriate provisions
of AASB 136.
Part A
AASB 136 provides specification relating to the impairment of assets. The main aim behind
specified standard is to stipulate the process that entities pertain to make sure that its assets
are conceded in comparison to their recoverable amount (Impairment of Asset. AASB 136,
2016). Impairment loss for asset is recorded in situation where carrying book amount is
higher in comparison to this recoverable value. If this condition is said to be satisfied, than
the concerned asset is illustrated to record loss due impairment and as per the provision of
cited standard decrease in value is shown as loss in books of accounts. It also indicates in
situation where organization is required to do accounting for reversal of loss shown as
impairment AASB 136 is applied for accounting all the assets except the following:
 Inventories (the same is dealt as AASB 102)
 Assets relating to construction contracts
 Deferred tax asset
 Financial assets which are covered under AASB 139.
 Non-current asset
 Investment property
 Assets covered under AASB 141and AASB 1023
Impairment of revaluing asset depends on the basis which is being applied for ascertaining
the fair value of the asset (HUANG, WANG and JI, 2017). In case the fair value of asset is its
market value than the variation between fair value deducted by the cost to sell and asset’s fair
value is believed as the direct incremental cost for selling of the asset. However, in case of
disposal cost is equal to negligible amount than the recoverable amount of revalued asset is