Professional Judgement and Impairment

PROFESIONAL JUDGEMENT AND IMPAIRMENT 1
UNIVERSITY NAME
STUDENT NAME
STUDENT ID
COURSE
DATE.

PROFESIONAL JUDGEMENT AND IMPAIRMENT 2
EXECUTIVE SUMMARY
The purpose of this research is to discuss the issue of professional judgement of accountants of
ALTIUM LIMITED regarding impairments of assets.it critically analyses how an accountant
uses their professional judgement in determination of various accounting decisions regarding
policies and rules governing impairments.it also examine how accountants treat various assets
such as goodwill and other intangible assets. This report also points out the implications that
unreasonable professional judgement can bring to the users of financial information.
It describes how to make various provisions regarding trade receivables. Accountant uses
professional judgement in determination of amount to be provided for doubtful debts.it is noted
that ALTIUM LIMITED has between 30-90 days’ terms of accounts receivables.
It also discusses how professional judgment regarding the determination of impairments will
assist the users of those financial information in making various decisions such as investment
decision.

PROFESIONAL JUDGEMENT AND IMPAIRMENT 3
Table of Contents
INTRODUCTION.......................................................................................................................................4
PROFESSIONAL JUDGEMENT...............................................................................................................4
IMPLICATIONS TO USERS OF ACCOUNTING INFORMATION IF PROFESSIONAL
JUDGEMENT HAS NOT BEEN MADE IN THE MOST REASONABLE MANNER.............................5
IMPAIRMENT............................................................................................................................................5
ASSETS IMPAIRED..................................................................................................................................6
GOODWILL AND OTHER INTANGIBLE ASSETS................................................................................6
ESTIMATION USED TO DETERMINE IMPAIRMENT.........................................................................6
AMOUNT OF WRITE-DOWNS AND RECONCILIATION THEREOFF................................................7
DISCLOSURE ON IMPAIRMENT TEST.................................................................................................7
HOW PROFESSIONAL JUDGEMENT ON IMPAIRMENTS ALIGN WITH OBJECTIVES OF
GENERAL PURPOSE FINANCIAL STATETEMENTS..........................................................................9
CONCLUSION...........................................................................................................................................9
REFERENCES..............................................................................................................................................10

PROFESIONAL JUDGEMENT AND IMPAIRMENT 4
INTRODUCTION.
Professional judgement is the use of skills and experience acquired from training. In accounting,
this is used in determination of accounting estimates and policies to be applied in determination
of various accounting decisions like measurement of impairments and calculation of fair values
of different assets.
PROFESSIONAL JUDGEMENT.
This involves use of knowledge, skills and experience amassed from long-term conduct of the
same job and from training through utilization of ethical codes relevant in the field and from
making some decisions such as accounting treatment of various transactions (Stefan, 2015, pg.
713).
Various companies would like to present their financial statements in the most impressive way
and in a way that can portray a good image of the company. To do this, companies must utilize
skills and experience of various accountants who can use skills and experience in determination
of various economic decisions affecting the company’s transactions.
When a professional judgement is used in making accounting decisions, relevant disclosures
must be adequately made and necessary documentations as to how various analysis and
conclusion were arrived at must be made.
It is applied when making some decisions in areas where there are some uncertainties and where
the elements concerned might have adverse effects on other parties. Professional judgement is
applied in various areas in accounting treatment and disclosures of various assumptions relating
to various economic transactions such as;
1. Accounting policies and estimates used in a particular transaction such as depreciable
useful life of a certain asset utilizes professional judgement of an accountant.
2. It is applicable in the determination of impairment of various assets, if such impairments
have happened and any provisions if any.