Corporate Accounting & Reporting | Study

Added on - 28 May 2020

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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:
1CORPORATE ACCOUNTING AND REPORTINGTable of ContentsAnswer to Part A:..........................................................................................................2Answer to Part B:..........................................................................................................5References:..................................................................................................................7
2CORPORATE ACCOUNTING AND REPORTINGAnswer to Part A:The fall in the net carrying value of the asset, which is beyond the futureundisclosed cash flows to be generated. The cost of acquiring the asset lessdepreciation could be adjudged as the net carrying value (He, Kelly and Manela2016). Impairment takes place at the time an organisation abandons or sells itsasset, which is not beneficial anymore. The impaired assets need to be recognisedin the form of loss in the income statement of an organisation. In order to computethe impairment loss, the factors need to be identified firstly leading to the impairmentof assets. These might constitute of changes in the market conditions, workforceturnover, new legislation or the asset has become outdated or old. After that, the fairmarket value of the asset is to be estimated, which is the price to be provided afterselling the same in the market. It could be termed as the recoverable amount of theasset or the future cash flow to be generated; in case, it continues to operate.After assigning the fair market value, it needs to be compared with thecarrying value of the asset listed on the financial statement of the organisation. Incase, the fair market value is lower in contrast to the cost of holding the asset, theasset could be considered as impaired. Despite the fact that impairment results intax benefit, it is not good for an organisation. This is because it implies increasedneed for investment (Avallone and Quagli 2015).There are three requirements for measuring and recognising an impairmentloss. Firstly, when the carrying amount of an asset is greater in contrast to thecarrying amount of the asset, the former amount needs to be minimised to the latteramount. Secondly, the difference between the minimisation from the previouscarrying value to the recoverable amount is called impairment loss. Finally, the
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