Financial Accounting : Assignment

Added on - 28 May 2020

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Running head: FINANCIAL ACCOUNTINGFinancial AccountingName of the Student:Name of the University:Authors Note:
FINANCIAL ACCOUNTING1Table of ContentsPart A:........................................................................................................................................2i).................................................................................................................................................2ii)................................................................................................................................................2iii)...............................................................................................................................................3iv)...............................................................................................................................................3V)................................................................................................................................................4vi)...............................................................................................................................................4vii)..............................................................................................................................................4viii).............................................................................................................................................5Part B..........................................................................................................................................5i).................................................................................................................................................5ii)................................................................................................................................................6iii)...............................................................................................................................................6iv)...............................................................................................................................................7v)................................................................................................................................................8Reference....................................................................................................................................9
FINANCIAL ACCOUNTING2Part A:i)The assets for which NAVITAS has conducted the impairment testing are as follows:a)Goodwill of the company.b)Brand names: It includes the various intangible assets in case a combination ofSAE business is undertaken.c)Other: It comprises of the licences and copyrights acquired through theprocess of business combinations.d)Trade and other receivables.e)Property, plant and equipment.The firm conducts the impairment testing for the above items in a way which is best suitedfor the recognition of any possible changes in the recoverable value of an asset.ii)The firm conducting the impairment testing in the following manner:a)At the end of each reporting date the intangible assets that have indefiniteuseful life and for the Goodwill the impairment testing should be conducted.This is also same for the assets not ready for use yet. The frequency of thetesting process is increased if the changes or events suggest that the there is apossibility that the assets may be impaired (Hoyle et al., 2015).b)The assets that are subject to amortisation are tested for impairment in case ofthe intangible assets if there are events or changes in circumstances indicatethe possibility of some impairment in the realisable value of the assets.c)In case of receivables, the impairment testing is conducted on on-going basis.
FINANCIAL ACCOUNTING3d)If the events or changes in the circumstances indicate that, the value of theassets may be impaired then impairment testing is conducted for plant,property and equipment.e)The impairment losses booked in the prior period in respect of the goodwill orother intangible assets at each reporting date to find out whether their amounthas reduced or they have become non-existent.iii)The company has not recorded any impairment expenditure for the year 2016 and 2017.iv)For the purpose of conducting impairment testing the management has to make estimatesabout the recoverable value of the assets. An estimation is made regarding the realisablevalue of the Cash Generating Unit if it is not directly possible to estimate the recoverableamount of the asset. It should be noted that the higher of fair value of asset less cost ofdisposal and value in use is regarded as the recoverable value of an asset or CGU is taken tobe. In computation of value in use the management has to estimate the future cash flows ofthe asset and also the pre-tax discount rate (Cortesi et al., 2015). The pre-tax discount rate isestimated by the management by assuming the risk that is specific to the asset or the CGU.The pre-tax discount rates are used in discounting the estimated future cash flows of theassets or CGU. In addition to this, the current assessment of the markets time value of moneyis used for the estimation.V)Yes there is a lot of subjectivity involved in the process of impairment testing. The periodafter which the impairment testing has to be conducted depends upon the subjectivejudgement of the management. Further the realisable value of the assets and the discounting
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