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Financial Accounting - Sample Assignment

   

Added on  2021-05-31

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FINANCIAL ACCOUNTING1Financial accountingStudent NameUniversity Name

FINANCIAL ACCOUNTING2Table of ContentsQuestion 1........................................................................................................................................3Part A...............................................................................................................................................3Part B: Reasons for impairment testing...........................................................................................3Part C: Factors to be considered in determining the CGU’s...........................................................4Question 2........................................................................................................................................4Part A...............................................................................................................................................4Part B...............................................................................................................................................7Part C...............................................................................................................................................8Question 3........................................................................................................................................8Question 4........................................................................................................................................9Part A: Cash flow statement (Direct Method) of Flash in the Pan Ltd............................................9Notes to Cash flows.......................................................................................................................11Part B: Cash flow statement indirect method of Flash in the Pan Ltd...........................................12References......................................................................................................................................13

FINANCIAL ACCOUNTING3Question 1Part ACash Generating Unit or CGU can be defined as a smallest group of assets that helps theorganizations in generating cash flows (Hoyle, Schaefer and Doupnik 2015). This areindependent from cash flows generated from other assets. In the given case, the CFO of the firmWentnor Dairy Company Ltd is aiming to evaluate the reasons for impairment testing and factorsto be considered in determining the CGU’s.Part B: Reasons for impairment testingImpairment testing is done while comparing recoverable amount of an asset with the higher ofthe asset’s value in use and fair value less costs of disposal. It also requires future cash flowestimation in order to derive the asset and price of bearing the inherent risk factor in the asset(Scott 2015).In case of some assets, there are no separate cash flows generated independently from otherassets. (Williams 2014). For example, in case of Wentnor Dairy Company Ltd milk machinescould have been used to separate cream from milk and these are not used in generation ofindependent cash flows. These machines could be sold separately, with a fair value less cost ofdisposal. But, Wentnor Dairy Company Ltd use the machines rather than selling them and thevalue in use is greater than the selling price. Due to this reason, impairment testing requires theuse of CGUs, rather than being based on single assets.

FINANCIAL ACCOUNTING4Part C: Factors to be considered in determining the CGU’sAs per AASB 136, there are several factors to be considered in case of determination of CGU’sof The Wentnor Dairy Company Ltd. These are as follows:-The process through which the organizations operational activities will be monitoredneeds to be determined. It may be through product, factory or district. This have beengiven in AASB 136. The management of the firm should make decisions regarding whether to continue withseparate CGU’s or to sale a part of it (Hoyle, Schaefer and Doupnik 2015).In case of Wentnor Dairy Company Ltd, the milk produced by the company can be usedin separate milk products and milk production section can also be used as separate CGU.It depends upon the organization whether to choose it separately or together.These are the factors to be considered by Wentnor Dairy Company Ltd in case ofdetermination of CGU’s. Question 2Part AWoolworths Ratio AnalysisBalance Sheet20172016

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