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Assessment task Part A: Assets tested for impairment

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ADVANCE FINANCE ACCOUNTING 8 ADVANCE FINANCE ACCOUNTING Advance finance accounting Name of the student Name of the university Author note Assessment task Part A 2 (i) Assets tested for impairment 2 (ii) Method of conducting impairment test 3 (iii) Impairment expenditures 3 (iv) Assumptions and estimates used by the company for conducting the impairment test 4 (v) Subjectivity involved in the process of impairment testing 5 (vi) Interesting, surprising, difficult or confusing part to understand impairment

Assessment task Part A: Assets tested for impairment

   Added on 2020-05-28

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Running head: ADVANCE FINANCE ACCOUNTINGAdvance finance accountingName of the studentName of the universityAuthor note
Assessment task Part A: Assets tested for impairment_1
1ADVANCE FINANCE ACCOUNTING Table of ContentsAssessment task Part A..............................................................................................................2(i)Assets tested for impairment...........................................................................................2(ii)Method of conducting impairment test........................................................................3(iii)Impairment expenditures.............................................................................................3(iv)Assumptions and estimates used by the company for conducting impairment test....4(v)Subjectivity involved in the process of impairment testing........................................5(vi)Interesting, surprising, difficult or confusing part to understand impairment testing.5(vii)New insights regarding conducting the impairment....................................................6(viii)Fair value measurement...............................................................................................6Assessment task Part B..............................................................................................................7(i)Reason why the former accounting standards does not reflect the economic reality.....7(ii)Reasons why under the previous accounting standards the lease liabilities of thereporting entities in the balance sheet were 66 times more than the reported debts under thebalance sheet..........................................................................................................................7(iii)Reasons why the Chairperson of IASB is in the view that under the previousaccounting standard no level playing field was there among some airline entities...............8(iv)Reasons why the Chairperson is in the view that the new standard will not bepopular with everyone............................................................................................................8(v)Possibilities that the new visibility with regard to all the leases will result into betterinformed decision for investment...........................................................................................9Reference..............................................................................................................................10
Assessment task Part A: Assets tested for impairment_2
2ADVANCE FINANCE ACCOUNTING Assessment task Part AThe main objective of this report is to focus on the impairment criteria andassumptions used by Bradken Limited for conducting the impairment tests on the assets. Thereport will also focus on the impairment testing procedures used by the company and thesubjectivity involved in the procedure. To comment on these the annual report of thecompany for the year ended 30th June 2016. Bradken Limited is the leading manufacturer inthe world for various capital and consumables products for the global market and deliverswide range of fabricated and cast products through four divisions focussed in the marketdivisions and independent branded business that includes transport and mining, processing ofmineral, fixed plant, services related to cast metal and engineered products (Bradken.com2018). The company uses their wide experience for developing the innovative products forfreight rail, mining, steel making, power generation, transport, gas and oil, cement andvarious other industries.An impaired asset is the asset of the company having the market value that is less thanthe carrying value of the asset. Assets that are likely to get impaired are the tangible fixedassets like plant, property, equipment and the intangible assets like accounts receivable andgoodwill (Amiraslani, Iatridis and Pope 2013). After adjusting the carrying value of theimpaired asset the loss is recorded in the income statement of the company. After writing offimpairment, asset will have a reduced carrying cost as the adjustments will be recognized asloss and will reduce the value of the asset. (i)Assets tested for impairment As per the annual report of the company for the year ended 30th June 2016, thecompany tested the following assets for impairment –
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3ADVANCE FINANCE ACCOUNTING Goodwill and intangible assets of are not amortised, however, it is tested forimpairment annually of frequently that is more than once in a year if changes in thecircumstances or any events indicates that it may be impaired and it is carried infinancial statement at cost reduced by accumulated losses on account of impairment(Rennekamp, Rupar and Seybert 2014). Other assets like plant, equipment andproperty, inventories are tested for impairment when there is an indication that thecarrying amount of the asset may not be recoverable. (ii)Impairment test procedureApart from the intangible assets and goodwill, other assets are tested for impairmentwhen the indication is there that the carrying amount of the asset may not be recoverable.However for intangible assets and goodwill that are not amortised are tested for impairmentannually of frequently that is more than once in a year if changes in the circumstances or anyevents indicates that it may be impaired. Further, the goodwill is allocated to cash generatingunit for carrying out the impairment testing (Cotter 2012). The non-financial assets except thegoodwill that suffered the impairment are analysed for the possible reversal of theimpairment at the each date of reporting. For impairment assessment the assets are grouped atlowest levels of separately recognisable cash inflows and are widely independent of cashinflows from the other assets or the group of the assets that is the cash generating units.(iii)Impairment expenditures The company recorded impairment expenses for the year ended 30th June 2016 as follows –Intangible assets and goodwill – during the period the company recorded totalimpairment amounting to $ 64.1 million on intangible assets and goodwill, out ofwhich $ 49 million was recorded against goodwill, $ 12.8 million were recordedagainst the customers list and $ 2.3 million were recorded against the licenses.
Assessment task Part A: Assets tested for impairment_4

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