Impairment Loss Calculation of Cash Generating Unit

accounting

Contents
Introduction...........................................................................................................................................2
Reversal of impairment loss on goodwill..............................................................................................2
Conclusion.............................................................................................................................................4
References.............................................................................................................................................7

Introduction
According to generally accepted accounting principles, an item of either tangible or
intangible assets cannot be valued more than its realizable value in the books of accounts. If
the value of any asset is more than its realizable worth then impairment account is needed to
bring the value of the asset again at the realizable value. When the assets are once recorded at
cost price then after, these values are revalued to take into consideration the market
conditions on a regular basis (AASB 136. 2009). Generally, acceptable accounting principles
allow revaluation of tangible and intangible assets whereas it also needs that revaluation
should not overvalue the amounts in the book of accounts. While calculating the amount of
impairment loss, it is clearly prescribed in ASAB 136 that calculation becomes a bit difficult
in case of cash generating unit. In the crux, the essay brings out a discussion on impairment
loss related with cash generating unit.
Reversal of impairment of goodwill
The prime aim of the impairment loss is to make sure that the given assets are at all not
overvalued in the books of accounts. Bookkeeping principles permit the assets to be revalued
in financial statements. Revaluation can be upwards or downwards. When the revaluated
assets goes upwards then a danger of overvaluation of assets always arises. The asset may be
specified at the overestimated amount in the books of accounts, even after when the
management revalues it (Dagwell, Wines, and Lambert, 2011). For instance- major downfall
in the market value of the item and if same downfall happens in a period of time, then the
value shown in the books of accounts would be more than what is. Falling down of market
value of asset would lead carrying amount in balance sheet to be at overvalued figures
(Gordon, and Hsu, 2017).