Impairment Testing Process - Report

Added on - 28 May 2020

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Running head: ADVANCED FINANCIAL ACCOUNTINGAdvanced Financial AccountingName of the Student:Name of the University:Author’s Note:Course ID:
ADVANCED FINANCIAL ACCOUNTING1Table of ContentsPart A:..............................................................................................................................................2Answer (i):...................................................................................................................................2Answer (ii):..................................................................................................................................3Answer (iii):.................................................................................................................................3Answer (iv):.................................................................................................................................5Answer (v):..................................................................................................................................6Answer (vi):.................................................................................................................................6Answer (vii):................................................................................................................................7Answer (viii):...............................................................................................................................7Part B:..............................................................................................................................................8Answer (i):...................................................................................................................................8Answer (ii):..................................................................................................................................8Answer (iii):.................................................................................................................................9Answer (iv):.................................................................................................................................9Answer (v):................................................................................................................................10References:....................................................................................................................................11
ADVANCED FINANCIAL ACCOUNTING2Part A:This report has an objective to focus on the assumption and impairment criteria employedin the behalf of M2 Telecommunications Group Limited in order to conduct asset basedimpairment tests. This report has an intention of assorting the impairment testing processes alongwith associated subjectivity within the process. For explain these processes, the company’syearly report for the year ended 30thJune, 2015 was taken into account for it did not provide theyearly report after the mentioned period (Banker, Basu and Byzalov 2016). The company isrenowned as an Australian retailer and wholesaler of offering telecommunication services,insurance, power and gas products. The firm has two business segments that includes thewholesale along with the consumer segment. M2 Telecommunications Group Limited has morethan 3000 employees all round New Zealand, Australia and Philippines and is now aligned withVocus Communications after 5thFebruary 2016 (Bianchi 2017).Moreover, an asset is said to be impaired that has a decreased market value in comparisonto its carrying value. The assets those are deemed to be impaired are tangible assets such asplant, property and equipment as well as goodwill that is an intangible asset (Bond, Govendirand Wells 2016). After carrying out adjustments with the impaired asset based carrying amount,loss is mentioned within the firm’s income statement. While writing off an impairment, the assetcan have decreased carrying cost as certain adjustments might be carried out as a part of loss andthis can result in asset value decrease (Bryan 2017).Answer (i):Considering the annual report ofM2 Telecommunications Group Limited in 2015, thetesting of impairment for different asset classes has been carried out. Intangible assets as well as
ADVANCED FINANCIAL ACCOUNTING3goodwill that is not being amortized rather than the fact that there are tested within thecircumstances or events this indicates that the assets that can be impaired along with the fact thatfinancial statements that is recorded within the financial statements within cost subtracted froman impaired accumulated loss (Contractor, Yang and Gaur 2016). Certain assets includeproperty, plant and equipment along with trade receivables that is tested for impairment in asituation where there is an indication regarding an assets carrying amount that is not thatrecoverable.Answer (ii):M2 Telecommunications Group Limited initiated a two-step technique for testing ofimpairment. The first step is focused on fair value contrasting associated with repotting unitalong with carrying value including the goodwill. In a situation where carrying value ofoperating unit remains high in contrast to the fair value, the second step is associated with testingof impairment test must be conducted in order to make sure impairment loss amount presence(Detzen, Wersborg and Zülch 2015). The second step is linked with implied fair value relatedwith the reporting unit in account to the that unit’s carrying amount. In a situation where, impliedfair value is decreased in comparison to the carrying amount, charge of impairment chargeremained within an amount related with that excess along with that realized loss might not gobeyond the assets carrying amount.Answer (iii):The company made certain the following impairment costs over the time ended on30thJune 2015:Intangible assets along with goodwill:
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