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Running head: CORPORATE ACCUNTING AND FINANCIAL REPORTINGCorporate Accounting and Financial ReportingName of the StudentName of the UniversityAuthor note
1CORPORATE AND FINANCIAL REPORTINGPart AReversal of an impairment loss for goodwillTesting the goodwill for impairment that is acquired under the businesscombination shall be allocated to 1 or more than 1 of the CGU of acquirer that isforecasted to provide synergies for the business combination irrespective of the fact thatwhether the other liabilities and assets of acquirer are allocated to CGU or particularasset.There is depreciation of intangible assets with passes of time and hence in thefinancial statement these assets are valued in terms of depreciation cost or afterrevaluation of such items. There are times when computed carrying amount for non-current assets does not equalize with the amount that are recoverable. As per AASB136-Imapairment of assets, carrying amount of assets should not exceed its recoveryamount. AASB 136-impairment defines recoverable amount as higher fair value of anasset after deducting its disposal cost or net selling price and considers its used value(Rennekamp, Rupar and Seybert 2014). The value obtain after deducting disposal costis called fair value of the asset as per revision of AASB 136 asset impairment on 31StMarch, 2004. Next, a brief discussion is made on Recoverable amount, Value in useand Fair value.Recoverable amount is defined as higher of fair value of an asset or value in use.In determination of impairment of assets, the idea of recoverable amount is used.The recoverable amount is computed in the following way-
2CORPORATE AND FINANCIAL REPORTINGRecoverableAmount=Fairvalue−CostofdisposalRecoverable amount gives the value in use.Fair value: The selling price of an asset in the marketCost of Disposal: incremental expenses attributing to disposal of an asset and its saleIn case where company belief its asset value is impaired, it should estimaterecoverable amount of fixed asset. The recoverable amount equals to its value in usefor cases where fair value of an asset less than the disposal cost. The fixed asset’srecoverable amount equal to far value less disposal cost when company willing to sellassets. If the asset is not impaired then recoverable amount is not necessary tocompute. It is the situation where recoverable amount (FV less cost of disposal) lessthan the carrying amount of the asset.Value in use refers to net present value (NPV) of a cash flow. Companies derivedthe value in use to calculate recoverable amount and hence, compute the los impairedwith the asset (Michalski 2014).Value∈use=Presentvalueoftheasset'sfuturecashflowbyputtigit∈useFuture cash flow is calculated from the asset use (Robinson and Sensoy 2016).Other possible components of assets should also be considered while computing cashflow.Discount rate:It is an important component of asset value. The average capital cost of acompany is calculated considering the time value of money. The rate of time value iscalled the discount rate.