Impairment of Assets and Acquisitions in Corporate Reporting

Running head: ADVANCED COPRORATE REPORTING
Advanced Corporate Reporting
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Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................7
References......................................................................................................................................10

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Question 1
a) Impairment of Assets can be well done with the Accounting Standard “IAS 36”, that sets out
the requirement to accounting for reporting and impairment of various non-financial assets of the
company. The IAS 36 specifies the needs to undertake and perform the various impairment test,
recognition of any asset impairment test and the associated disclosures for the company.
Impairment of Assets can be well explained with the help of a sudden or an unexpected fall in
the asset service utility or property. Changes in the legal code, physical damage in the asset,
obsolescence due to technological innovation (ACCA Global 2019).
The impairment value is calculated with the help of the carrying value of the asset and the
fair value of the asset whereby any changes recorded in the value of asset is recorded as an
impairment expenses for the company and the associated amount is charged in the income
statement of the company (Ifrs.org 2019). Impairment losses is the total amount by, which the
total carrying amount exceeds the cash-generation unit or the recoverable amount. The concept
of impairment of assets applies to all the assets except from the assets that arise from the
construction contracts, inventories, deferred tax assets and various other financial assets
(Readyratios.com 2013).
The key reason for the impairment of assets as stated in the IFRS Guidelines and in
accordance with the “IAS 36” is as follows:
i) When the market value for the property declines
ii) Increase in the market rate or prevailing rate of interest
iii) Changes in the technology, economy structure, laws rules and regulations.

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iv) Asset as a part of restructure that is held for the purpose of disposal
v) Physical Damages or Obsolescence that would be resulting in the changes in the value of the
assets (Ey.com 2019).
The key requirements of the IAS 38 can be well illustrated in the Diagram presented below:
 If there is any slight indication for the asset can be well impaired, the amount
recoverable that would be well compared with the help of the carrying value of the
assets.
 The recoverable amount for the company can be well compared with the help of the
carrying value and accordingly the company can take its decision accordingly.
 It is important as stated in the Applicable IFRS and IAS 36 that any impairment charges
made by the company should be well accompanied with notes justifying the changes in
the values of assets and the reasons behind the changes in the assets of the company
(Ifrs.org 2019).