Financial Accounting Processes

Running head: FINANCIAL ACCOUNTING PROCESSES
Financial Accounting Processes
Name of the Student:
Name of the University:
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FINANCIAL ACCOUNTING PROCESSES
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Contents
Part A:..............................................................................................................................................2
Answer 1:.....................................................................................................................................2
Answer 2:.....................................................................................................................................5
Answer 3:.....................................................................................................................................6
Part B:............................................................................................................................................10
References:....................................................................................................................................11

FINANCIAL ACCOUNTING PROCESSES
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Part A:
Answer 1:
Part a:
Impairment of asset is the process that requires an organization to conduct impairment testing on
its non-current assets to check whether the carrying value of any of its non-current assets is more
than the value of its use in business or net realizable value as on the date of the financial
statements. In case the value of an asset in use or net realizable value is less than the carrying
amount of such asset then the resultant difference is termed as impairment loss (Bond, Govendir
& Wells, 2016). In this case the impairment loss is calculated below.
Impairment loss as at June 30, 2020 of aviation division is calculated below:
Part a:
Impairment loss as at June 30, 2020
Particulars Amount ($) Amount ($)
Building cost 600,000.00
Less: Depreciation 100,000.00
500,000.00
Equipment at cost 500,000.00
Less: Depreciation 200,000.00

FINANCIAL ACCOUNTING PROCESSES
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300,000.00
Inventory 25,000.00
Land 250,000.00
Receivables 150,000.00
Goodwill 90,000.00
(A) Total value of assets at aviation division 1,315,000.00
(B) Value in use of the division 515,000.00
Impairment loss (A-B) 800,000.00
Thus, the amount of impairment loss to be recognized as at 30th June, 2020 in the books of Aero
Ltd for cash generating unit of aviation division is $800,000 as can be seen from the above
calculation (Seow, 2019).
Part b:
In this case the impairment loss is against a cash generating unit that has number of different
assets thus, it is important to allocate the amount loss to individual assets on the basis of carrying
value of these assets. Accordingly, a table of allocation to allocate the amount of impairment loss
is prepared below as per the format given in the document (Cotter, Martin & Stokes, 2019).
Assets (A) Carrying Proportion (B) Loss Adjusted carrying