Report on Accounting Standards
Added on 2020-02-24
7 Pages1543 Words55 Views
Accounting Standard & Regulations1
IntroductionThe analysis carried out in the present report aims at examining the accounting standardsdeveloped by IASB in relation to asset impairment. The IAS 36 and AASB 136 has been adoptedin relation to the impairment of assets as per which the writing value of an asset during financialreporting must not exceed its recoverable amount (Hussey, 2010). The report illustrates theneed, processes and information required by businesses for impairment testing of assets withreference to Myer Holdings Ltd. The report is directed to the CFO of Myer on the behalf of anaccounting associate for evaluating whether the impairment of assets is an issue required to beaddressed by the firm.Necessity of Impairment Testing of Assets In Relation to MyerThe identification of impairment testing of assets of Myer is carried out by analyzing thecondition of its tangible and non-tangible asset as follows:Asset Recognition: The flow of assets in Myer’s stores is relatively same and there is noevidence of decline in its asset in the group store over the past year. Thus, in the basis ofasset flow in the Group it can be said that there is no indication of impairment of assets.Asset Value: There is no change in the overall asset base of the Group and all the assetshave an equal contribution towards its net assets and therefore there is no assetimpairment.Asset Turnover Rate: There is similar asset turnover ratio of the Group over the past fewyears indicating no impairment of assets (Myer Holdings Limited 2016 Annual Report,2016).Determination of Asset Impairment of MyerThe Myer Holdings Ltd has determined the impairment of assets through the use ofdiscounted cash flow model. As depicted in the financial report of the Group, it has recognized agoodwill of about $27.1 million having an indefinite useful live. The goodwill cannot beassigned to the individual cash generating units of the Group and therefore have been distributedto the overall business group. The recoverable mount of these assets has been measured througha value in use discounted cash flow model for carrying out their impairment testing. The model2
used cash flow projections over the period of five years that are based on financial budgets andterminal growth rate. The major assumptions used by the model are sales growth and operatinggross profit margin. The sensitivity analysis of these assumptions illustrated that there is nochanges in these key assumptions at given level of excess future cash flows over the carryingvalues of asset for CGU of Myer Holdings Ltd. Thus, the carrying value of CGU does not exceedthe recoverable amount of assets indicting no asset impairment. The Group has also disclosedabout the accounting policies and procedures adopted for determining the assets impairment. Thegoodwill and intangible assets having indefinite useful lives are annually reviewed forimpairment testing. Also, other non-current assets are reviewed for impairment testing onidentification of any changes that indicates that their carrying amount may not be recoverable.The recoverable amount is greater than the fair value of an asset less cost to sell and value in use.The assets are categorized at the lower levels having identifiable inflows of cash and have nodependency on the cash inflows of other asset groups. The store assets have individual stores astheir cash generating unit (Myer Holdings Limited 2016 Annual Report, 2016).Information needed by Myer in determining asset impairments3
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
IAS 36 || Impairment Of Assets Assignmentlg...
|7
|1615
|57
Advanced Financial Accounting Assignment (AFA)lg...
|15
|3110
|29
Accounting Standard & Regulations | Report Myer Holdings Ltdlg...
|7
|1535
|246
Corporate Accounting Assignment | Reporting Assignmentlg...
|9
|2003
|36
(pdf) Corporate Accounting Assignment Samplelg...
|6
|1554
|20
Assignment on Financial Accounting(FA)lg...
|6
|1801
|68