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Report on Impairment Test Process

   

Added on  2020-05-28

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PART APart (i)Bell Financial Group Limited Company has been given to make the analysis of the annual reportof the company. The company is Australia based and listed on the stock exchange of Australia.The company is in into the business of broking, financial and advisory related services. For thepurpose of the analysis of the impairment testing the company’s annual report of the companyfor the financial year ending 2016 has been considered. It is because the year end results for theyear 2017 will be made available after 21st of February 2018 as mentioned on the website of thecompany.The company has tested the following assets including the tangibles and the intangibles both forthe purpose of the impairment as laid down in the accounting standard number 136. These are:Other intangibles assets of the company and the major intangible Goodwill of thecompany which is acquired on the business combinations, mergers of acquisitions. Otherintangible comprises of research and development and customer lists. Loans and Advances given by the company in the ordinary course of the business. Property plant and equipment of the company including the furniture and fixture, officeequipment and leasehold improvements. Trade receivables from whom the amount is receivable on account of the supply ofservices or selling of any product (Company Official Website, 2016).Thus, following are the assets which have been tested for the impairment.1
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Part (ii)The company has conducted the tests for impairment of the aforementioned assets in accordancewith the accounting standard number 136 and also in accordance with the key assumption andthe estimates that the company has made in accordance with the present market conditions.The process of the impairment tests have been listed below:-In the beginning, the carrying amount is identified and which is equal to the amount asmentioned in the statement of affairs of the company. -Then the recoverable amount will be determined and well calculated-Then both the values are compared and in case the carrying amount in identified as inexcess of the recoverable amount then the impairment will be charged to that particularassets. -For identifying the recoverable amount, few calculations are required to be made. Theseinclude the calculation of value in use and the net selling price. Value in use is theamount which will be equal to the net present value of the cash inflows and the outflowsestimated for the future years and that too comprises of the terminal value of the asset atthe end of its useful life. Net selling price is nothing but the amount equal to the amountreceived as net of expense for the sale of the assets (AASB, 2016). -For the impairment of the trade receivables and the loans and advances the risk factorsare observed as to whether the company will be able to receive the exact amount stated inthe balance sheet or the less will be received. If second will be the case then theimpairment will be charged. -The annual report has further stated that in case the individual assets as stated in thebalance sheet may be it tangible or intangible is not able to provide the incomeindependently to the company then the cash generating units will be identified andaccordingly the recoverable amount and the carrying amount will be ascertained. 2
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Part (iii)When the carrying amount of an asset exceeds the recoverable amount of the assets, the chargeof impairment is required to be made on the asset by deducting the value from the asset of thecompany and by charging the equivalent amount to the statement of the profit and loss account.In the case of the given company – Bell Financial Group Limited, the assets have been tested forimpairment but zero value has been charged to the consolidated statement of the profit and lossaccount. The detail of the impairment charges and the assets corresponding to impairment is givebelow:-The company has reported the Nil Amount of impairment on loans and advances as at31st of December 2016.-Trade debtors and other receivables also have included the Nil amount of the impairmentfor the year ending 31st of December 2016 and also nil amount in the previous year.-No impairment has been charged for the goodwill and other intangibles also not only forthe current financial year ending but also for the financial year ending 31st of December2015. -Impairment has also not charged for the property plant and equipment not only for thecurrent financial year ending but also for the financial year ending 31st of December 2015(Company Official Website, 2016).Part (iv)The key assumptions and the estimates as used by the company for the purpose of calculation ofthe impairment charges have been detailed below:1.The first and foremost basic assumption is that the tangibles and the intangibles are testedfor the impairment on the yearly basis and that too on the end of the financial year that isthe balance sheet date. 2.Secondly the trade and other receivables including the loans and advances are tested forthe impairment on ongoing basis. It is because the trade receivables forms part of the3
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