Financial Impairment Assignment - Codan Limited

Running head: FINANCIAL IMPAIRMENT
Financial Impairment
Name of the Student:
Name of the University:
Author Note:

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FINANCIAL IMPAIRMENT
Table of Contents
Assessment Task: Part A:................................................................................................................2
1. Impairment Test of the Asset value.............................................................................................3
2. Procedure of Impairment Test.....................................................................................................4
3. Expenditure of the Impairment....................................................................................................4
4. Necessary estimation and assumptions associated with the impairment test..............................6
5. Associated subjectivity in Impairment Testing Process..............................................................7
6. Surprises, difficulties, confusion, and interest associated with the impairment test...................8
7. Insights derived from the impairment test...................................................................................8
8. Measurement of the Fair Value...................................................................................................8
Assessment Task Part B:.................................................................................................................9
1. Absence of former accounting standards in the economic reality...............................................9
2. Reasons why under the previous accounting standards the lease liabilities of the reporting
entities in the balance sheet were 66 times more than the reported debts under the balance sheet.9
3. Views of IASB Chairperson regarding the accounting standards.............................................10
4. The view of Chairperson about the ineffectiveness of the new standards.................................10
5. Possibilities in providing better improvement in investment decisions....................................10
References......................................................................................................................................12

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FINANCIAL IMPAIRMENT
Assessment Task: Part A:
The financial impairment depends on the costs that include exceeded amount of the book
value. This report would provide the insights of the financial impairment and the underlying
assumptions. Codan Limited, the financial corporation, would prepare the financial statements
and the annual report by conducting the impairment tests based on the measurements of existing
assets. Furthermore, the report would also focus on the associated practices and procedures
related to the impairment tests process developed by the organization. The study would also
provide the clear elaboration of the subjectivity associated with the developed tests of financial
impairment. Codan Limited has captured the leading position in manufacturing and supplying
the mining technology, communication, and metal detection technicalities. Headquarter of the
company is in South Australia from where the company generates the revenues of almost $132.3
million. The information obtained from the annual report of 2016 suggests that the company
utilizes the highly advanced technologies to overcome the issues emerge due to the security,
communication, safety parameter, and productivity. Currently, the company has secured the
position in the competitive business market by selling the products in 150 nations from which
almost 85% revenue is gathered.
According to Amiraslani, Iatridis and Pope (2013), asset impairment is conceptualized as
the measurement of the lower value of the existing asset than the actual value. It is necessary to
facilitate the impairment in the tangible fixed assets, such as plant, property, and equipment.
Apart from these tangible assets, it is necessary to impair the intangible assets as well, such as
establishing the good will and developing the remarkable account receivable. The income
statement of the company highlights the subsequent loss, which is needed to be adjusted for

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FINANCIAL IMPAIRMENT
improving the values of the assets by undertaking impairment practices. The practices for writing
off impairment display the reduced level of the carrying cost. The asset value is decreased as
some of adjustments are made and the result further discloses the significant loss.
1. Impairment Test of the Asset value
Codan Ltd published the annual report on 30th June, 2016, in which the entire financial
impairment test result is systematically informed. It has been observed that the impairment tests
are conducted annually or more than once in a year. The report of these tests specifies that the
reputation of the company, which is considered as the major intangible asset, is not amortized n
the field of financial account. Andrews (2012) implied that the asset impairment is generally
required if the company makes any changes to the event or to any specific circumstance. The
further report indicates that the accumulated loss during the impairment affected the financial
aspects by decreasing the costs. The other assets in Codan Ltd. include property, equipment,
inventories and plants. These assets are also needed to be tested for the impairments, especially
when the irrecoverable amount becomes the major concern.