Corporate Finance and Reporting

This article discusses impairment loss for cash generating units and journal entries for impairment loss occurring in 30 June 2015. It provides insights into IAS 36 and its impact on financial statements. The article also covers factors affecting impairment loss, adequate recognition method, and fair value method. The subject is corporate finance and reporting, and the course code and college/university are not mentioned.

Running head: CORPORATE FINANCE AND REPORTING
Corporate Finance and Reporting
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Table of Contents
Part A: (Impairment loss for cash generating units excluding Goodwill).................................2
Part B: Journal entries prepared for the impairment loss occurring in 30 June 2015................4
Reference and Bibliography:......................................................................................................7

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Part A: (Impairment loss for cash generating units excluding Goodwill)
Goodwill is relatively considered as not and impairment loss that needs to be carried
on during the calculation from the carrying amount of an asset of cash generating unit. The
calculations relatively indicate that the impairment loss is relatively depicted on units such as
plant, brand, and fittings, which are relatively considered one of the cash generating units for
an organisation. The impairment loss is relatively calculated by detecting the carrying amount
of the Asset or cash generating units which is derived after deducting depreciation and
impairment loss of a particular asset. However, certain factors such as recoverable amount,
net selling value, carrying amount and depreciation amount can be used for detecting the
overall impairment loss that an organisation has faced during the fiscal year. The impairment
loss relatively indicates the future declining value of a particular asset, which is considered as
a cash generating unit by the organisation. The impairment loss is calculated with the help of
IAS 36 regulation which indicates the different methods that can be used by companies to
detect their impairment loss in the balance sheet and income statement. This irrelevant
depiction of impairment loss in the financial accounts relatively reduces their financial
strength over time as the assets are the values and losses incurred by the company. From the
evaluation it is indicated that impairment loss is those amount, which exceeds future
undisclosed value of a particular assets the organisation (Chen 2018).
Adequate recognition method is a relatively depicted in IAS 36, which is used by
companies to detect the impairment loss of their assets. Moreover, the carrying amount value
is relatively considered before declaring an impairment loss, as the value needs to be created
and the recoverable amount of the assets. The impairment loss calculated by the organisation
is reflected in the comprehensive income statement, where IAS 16 standard directly in the
kids be fair value method which needs to be maintained by the organisation. The fair value

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method the relatively helps in shifting the actual value of the Asset and force the organisation
to conduct impairment loss on there be valued assets.
Impairment loss clause depicted in IAS 36 indicates the organisation to reduce the
Asset Value, when we are not carried more than the actual amount. However, the calculation
of impairment loss relatively nullifies the use of goodwill and certain intangible assets to be
deducted from the Asset Value. With the help of adequate test, the impairment loss of an
asset is detected which has the organisation to minimise the Asset Value over time in their
balance sheet. In this context. Guler (2016) stated that if the fair value of an asset the clients
below the carrying value then relevant impairment loss are recorded by the organisation to
comply with the changing values of the asset. On the other hand, Vasek et al. (2016)
companies directly use the loopholes in accounting measures to inflate their balance sheet
and decline the cash outflow from their operations. The use of impairment loss is used to
reduce the tax expenses and dividend expense by the organisation over the period of time.
The impairment loss can be conducted due to the changes in external sources used by
the organization such as the climb and market value, technology change, increment and
market interest rates, and economic loss. The occurrence of all the above measures would
directly change the relevant net asset value of the organization and increase the chance of
impairment loss. Impairment loss is relatively considered a reduction in asset value, which is
portrayed as a lost in the balance sheet. the payment loss is not considered the actual cash
outflow that is conducted by the organization over the period, while it is a theoretical loss,
which is obtained by the organization due to the production and its assets. IAS relatively
needs the organizations to value their Assets on market basis, which relatively change is the
due to the valuation method. The incremental value does not affect the balance sheet and
income statement of the organization whereas any kind of decline in the values of asset
directly result in impairment loss. Kabir, Rahman and Su (2017) status that the impairment

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loss does not have any kind of negative impact on their cash flow statement as the expense is
a relatively considered paper transaction rather than cash flow transaction.
Therefore, it could be understood that with the help of IAS 36 organizations are able
to detect the impairment loss that needs to be conducted over the period, which is derived
after the valuation process (Iasplus.com 2018). The recoverable amount the disposable
amount and the fair value amount are relatively calculated with the help of impairment loss,
which would help in understanding the level of amount that will be deducted from the Asset
Value and profit and loss account. The overall cash flow projection is relatively based on
reasonable assumptions regarding the current value of the assets held by the organization. On
the other hand, with the help of fair value and carrying value detection organizations are able
to understand the level of impairment loss incurred in their current asset value.
Part B: Journal entries prepared for the impairment loss occurring in 30 June 2015
Particulars Amount Amount
Plant 799,200 799,200.00
Brand 184,000 184,000.00
Fitting 116,000 116,000.00
Inventory 50,000
Goodwill 42,000 42,000.00
Total 1,191,200.00 1,141,200.00
Gali Ltd calculated the value in use of the division 1,065,200.00
Impairment loss 76,000.00
Goodwill 42,000.00
Remaining impairment losses for tangibles 34,000.00

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Distribution of
impairment loss
Amount Portio
n
Allocatio
n loss
Net carrying
amount
Plant 799,200.00 72.7% 24,720.52 774,479.48
Brand 184,000.00 16.7% 5,691.41 178,308.59
Fittings 116,000.00 10.6% 3,588.06 112,411.94
Total 1,099,200.0
0
100% 34,000.00 1,065,200.00
Journal Entries for the impairment loss:
Particulars Amount Amount
Impairment loss Dr 34,000.00
Accumulated depreciation and impairment loss-Plant 24,720.52
Accumulated depreciation and impairment loss-brand 5,691.41
Accumulated depreciation and impairment loss-fittings 3,588.06
(Allocation of impairment loss)
Further depreciation in Plant:
Particulars Amount
Plant 774,479.48
Fair Value Plant 768,663.00
Depreciation on Plant 5,816.48
Particulars Amount Amount

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Impairment loss Dr 5,816.48
Accumulated depreciation and Impairment Loss-Plant 5,816.48

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Reference and Bibliography:
Chen, B., Hui, J., Montgomery, K.S., Gella, A., Bolea, I., Sanz, E., Palmiter, R.D. and
Quintana, A., 2017. Loss of Mitochondrial Ndufs4 in Striatal Medium Spiny Neurons
Mediates Progressive Motor Impairment in a Mouse Model of Leigh Syndrome. Frontiers in
molecular neuroscience, 10, p.265.
Chen, L., 2018. 106. Research on the Formulation and Evolution of the Impairment Loss
Model of Financial Assets Based on the Expected Loss Model. Boletín Técnico, ISSN: 0376-
723X, 55(18).
Guler, L., 2016. Has SFAS 142 improved the usefulness of goodwill impairment loss and
goodwill balances for investors?. Review of Managerial Science, pp.1-34.
Iasplus.com. (2018). IAS 36 — Impairment of Assets. [online] Available at:
https://www.iasplus.com/en/standards/ias/ias36 [Accessed 9 Jan. 2018].
Kabir, H., Rahman, A.R. and Su, L., 2017. The Association between Goodwill Impairment
Loss and Goodwill Impairment Test-Related Disclosures in Australia.
Matos, N., Castro, L., Boschetti, D. and Glisoi, S., 2015. Comparative Analysis of Functional
Profile of People with Intellectual Disability Aged with the Diagnosis of Degree of
Impairment Loss of Childhood-Adolescence. European Psychiatry, 30, p.1472.
Pagnussat, N., Almeida, A.S., Marques, D.M., Nunes, F., Chenet, G.C., Botton, P.H.S.,
Mioranzza, S., Loss, C.M., Cunha, R.A. and Porciúncula, L.O., 2015. Adenosine A2A
receptors are necessary and sufficient to trigger memory impairment in adult mice. British
journal of pharmacology, 172(15), pp.3831-3845.

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Vasek, M.J., Garber, C., Dorsey, D., Durrant, D.M., Bollman, B., Soung, A., Yu, J., Perez-
Torres, C., Frouin, A., Wilton, D.K. and Funk, K., 2016. A complement–microglial axis
drives synapse loss during virus-induced memory impairment. Nature, 534(7608), p.538.