Application of Professional Judgment on Impairment Testing

FINANCIAL ACCOUNTING
AND REPORTING
Application of Professional Judgment
On
Impairment Testing

REPORT ASALEO CARE 1
Executive Summary
The following work highlights the significance of the exercise of the professional judgements
in the preparation and presentation of the financial statements for the use of the shareholders
and stakeholders. While, the professional judgements are exercised in the varied areas of the
accounting, the area impairment of assets is highlighted in the work.
The annual report of the ASX listed company Asaleo Care Limited serves as an aid for the
evaluation of the application of professional judgements. Some key areas identified are the
measure of discount rate, future cash flows, expects performance of CGU and others.

REPORT ASALEO CARE 2
Introduction
The preparation of the financial reports is done by the corporations with
the aid of the accounting pronouncements and guidelines. These
guidelines not only aid the stakeholders of the company to gain insight of
the business of company, but also makes the comparison and evaluation
of the financial performance over the years in a systematic manner
(Garrett, Hoitash and Prawitt, 2014). Additionally, financial statements aid
in decisions making for various stakeholder groups in respect of the
performance of corporation. One of the significant elements of the
preparation and presentation of the financial statements is the exercise of
the professional judgement by the accountants.
The reports is aimed at studying the accounting process, relevancy of the
professional judgements with respect to the impairment of the assets in
respect of the ASX listed company Asaleo Care. The report has the
objective of evaluation whether the relevant approaches have been
followed by the entity and the role of the same in provision of information
to the shareholders and other stakeholders of the corporation.
Conceptual Framework and the Role of professional judgements
In order to ensure the uniformity in interpretation across numerous
accounting procedures, the International Accounting Standards Board
(IASB) developed a set of accounting fundamentals and objectives that
are collectively known as the accounting conceptual framework. The ACF
helps the accountants so that they may prepare the report, which can be
understood worldwide. In other words, conceptual frameworks are rules
and principles that should be considered by accountants while dealing
with an issue (Accountingtools.com, 2018). Professional judgment is one
of the aspects in this area, which provides a conceptual framework for the
accountants. Before discussing the importance of professional judgment,
the first meaning of the same is required to understand.