HA 3011 Advanced Financial Accounting Assignment

HA 3011 Advanced Financial Accounting
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Contents
Introduction................................................................................................................................3
Assessment task Part A..............................................................................................................4
Assessment task part B...............................................................................................................7
Conclusion................................................................................................................................12
References................................................................................................................................13
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Introduction:
This assignment is formed to gain insight into the accounting concepts. It will make a clear
interpretation of the impairment testing process and lease accounting standard. Impairment
testing process is done through a practical example of Telstra Corporation. Lastly, there is
also ascertainment about the impact of changed lease accounting standard. This is assessed by
referring the case study which contains the opinion of IASB chairman about the drawbacks of
the existing lease accounting standard and the changes brought in by the new lease
accounting standard. This is done so as to make better and effective economic reality.
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Assessment task Part A:
(i)
In accordance with the Annual report (2017) of Telstra Corporation, all the non-current
tangible assets such as and intangible assets are subject to testing for impairment. The
assessment is done to overview the difference in the value of carrying amount (presented in
the financial statement) of the asset.
(ii)
Impairment testing of non-current asset: The non-current tangible assets are subject to
impairment testing whenever it is assessed that the carrying value is not recoverable. For the
purpose of impairment testing, a small group of assets is considered which provides
independent inflows. Then the comparison is done of the recoverable amount with the fair
value in which cost of disposal and value of use is deducted. Whenever an impairment loss is
recognized, then the loss amount is presented as an expense in the profit and loss account
(Telstra Corporation, 2018).
Impairment testing of Goodwill and other intangible assets: the intangible assets are
tested by comparing the recoverable amount to the carrying value of the cash generating unit
(Telstra Corporation, 2018).
(iii)
Yes, the organization has mad impairment during the year. For the non-current assets, the
organization has impairment loss of $324 million. For goodwill, there was a record of $ 64
million as an impairment loss in the financial statement. Thus, these amounts were recorded
in the expenses in profit and loss account of the organization (Telstra Corporation, 2018).
(iv)
The organization makes the impairment testing by comparing the recoverable amount to the
fair value less cost of disposal and value in use. The concept of value in use represents the
current value of future arrival amount (net of outflow) with the constant use of asset and
disposal activity. The company makes major assumptions in ascertaining the calculations
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