Impairment Loss in Cash Generating Units Excluding Goodwill

IMPAIRMENT LOSSS
[Type the company name]

CORPORATE ACCOUNTING 1

CORPORATE ACCOUNTING 2
Part A
Introduction
According to the accounting standard, the tangible and intangible assets of the company
should be mentioned at the realisable value in the financial statement. It is noted that the
value more than its realisable value is not mentioned in the financial statement because it
arises the risk for the company. If the value of the asset is stated more than its realisable value
in the financial statement of the company than impairment is needed in order to bring the
value equal to the realisable value of the asset (Accounting Tools, 2018). The tangible and
intangible assets are recorded at their realisable value but the values of these assets are
revaluated time to time as per the market conditions. As per the accounting principle, the
company has to revalue the cost of tangible and intangible asset but the result of these
revaluations should not be overvalued in the figures in the financial statement. The
calculation of impairment loss is easy in the case of the individual asset as per the ASAB 136
but computation of impairment is difficult in the terms of cash generating unit. In this essay
the discussion is made on the topic of impairment loss for cash generating units excluding
Goodwill (Accounting Tools, 2018b).
Purpose and objective of Impairment test
The main objective of the computation of impairment loss is to make sure about the values of
assets. According to the accounting principle, it is necessary to revaluate the value of assets
in the books of accounts. It is observed that the revaluation of the asset either is upward or
downward. But if the revaluation of the asset is upward then the risk of overvaluation of asset
arises. It is necessary to revalue the amount of the asset because the value of the asset is
change time to time as per the market condition. For example- there may be significant
downfall in the market value of the assets then it is compulsory to revaluate the value of the