Disclosure of Impairment Test Assignment
Added on 2020-04-01
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RUNNIGN HEAD: Disclosure of Impairment test1Disclosure of Impairment test
Disclosure of Impairment test2Part-AIntroductionWith the increasing ramification of economic changes and complex reportingframeworks, all the listed companies implement impairment test on its assets to identify the trueand fair view of their assets. It is evaluated that IAS-136 is the international accounting standardwhich is followed by organization to implement impairment test on its business functioning.International financial reporting authority has implemented IAS-136 to strengthen thetransparency of its assets value by following effective level of disclosure of impairment loss. It isdetermined that the disclosure of impairment loss is more extensive when the impairment loss isdeducted from the goodwill. The main disclosure requirement is related to deducing theimpairment loss from the goodwill and implementing proper level of impairment test. With thehelp of this impairment test implemented by companies may showcase the true and fair view ofassets (Dagwell, Wines, and Lambert, 2011). This impairment test should be implemented byfollowing all the rules and regulations of IAS-136 to identify the true value of assets. However,the main problem in impairment test arise when organization find difficulty finding the marketvalue of assets. The accounting principles permit revaluation of assets of company on periodicbasis to determine the value of assets in books. However, disclosure of impairment loss becomecumbersome when these computed impairment loss is deducted from the goodwill and other cashgenerating units of organization. 2
Disclosure of Impairment test3Impairment Test disclosure Purpose and ObjectivesThe main objective of implementing impairment test is to identify and evaluate whether theassets shown in the books of accounts are reflecting true and fair view of assets. There areseveral organizations who had been cheating with their stakeholders by falsifying the wrongvalue of assets in their balance sheet (AASB 136, 2009). Therefore, disclosure of impairment testmay strengthen the faire view of assets and reporting frameworks as per the internationalfinancial reporting standards. Ideally, impairment loss disclosure should be done on periodicbasis and it could also be done by company whenever these companies feel to impair their assets.(Dagwell, Wines, and Lambert, 2011). This disclosure of impairment test may increase the fairvalue of its assets (Dagwell, Wines, and Lambert, 2011).It is evaluated that while implementing impairment test, company needs to find out themarket value of its assets and amount of assets shown in the books of accounts. This level ofdifferences between market value and books of accounts of assets of company is undertakenthrough the impairment test. If company could implement proper level of IAS-136 then it willincrease the overall reporting frameworks in determined approach (Ernst & Young LLP, 2015).If carrying amount of organization is low as compared to books value of assets shown in thebooks of accounts then it will result to impairment loss and should be disclosed in the books ofaccounts of company on periodic basis (AASB 136, 2009). The disclosure requirements for the implemented impairment test are given as belowAs per the provisions of AASB 136, all the assets should be tested for impairmentindividual basis. Extensive disclosure is required to be made by organization whenever3
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