Application of Professional Judgment in Financial Accounting Report

This report examines the critical role of professional judgement in financial accounting, particularly within the context of impairment testing as outlined in IAS 36. The student's analysis highlights the necessity of accounting expertise in interpreting and applying accounting standards, especially when dealing with complex issues such as impairment charges on assets. The report discusses the significance of judgments related to cash-generating units and estimated future cash flows, emphasizing the potential impact of these decisions on a company's financial position and reputation. The author stresses the importance of management's assessment of impairment charges to ensure the fair presentation of financial statements and the provision of comprehensive disclosures to aid stakeholders in their decision-making processes. The report provides insights into the practical application of accounting principles and the challenges of maintaining accuracy and transparency in financial reporting, emphasizing the need for sound technical knowledge and judgment in the accounting profession.

Running head: FINANCIAL ACCOUNTING AND REPORTING
Financial Accounting and Reporting
Name of the Student:
Name of the University:
Author’s Note

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FINANCIAL ACCOUNTING AND REPORTING
Transcript
Accounting professions requires sound technical knowledge and skills to make applications
of the same in the reporting framework which is used. I am well aware the level of skills and
expertise which is required in preparation of the financial statements. In addition to this, there
also involves judgements on the part of accounts on some of the fundamental concepts in
accounting. I learned that there are a number of standards which have been issued by AASB for
ensuring that proper accounting practices in carried out in a business.
The accounting standards are prepared to help out the accountants for understanding the
treatments which is required to be done and also the disclosures which is required to be provided,
The different accounting standards makes the accounting process more systematic but I found
that the interpretation of the accounting standards require proper judgement on the part of the
accounting for applying the provisions in reporting framework and also the users for
understanding the meaning of the information which is provided in the financial reports.
An example which I have recently came across IAS 36 which is on impairment on assets.
The standards deal with impairment charges on assets which is to be done when the carrying
amount of the asset is lower than the fair value of the asset. The standard requires professional
judgement on certain aspects of the standards as Cash generating units, estimated future cash
flows which can be generated from the asst are considered for tax purposes. The amount which is
to be charged to the impairment of a asset depends on the judgement of the auditor.
As per the annual reports of the company for the year 2018, in order to effectively test the
impairment on assets the rate which is considered and the estimated future cash flow from the
asset would also be considered by the management. The opinion of the audit committee is that
the management of the company needs to appropriately follow the provisions which are stated in

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FINANCIAL ACCOUNTING AND REPORTING
IAS 36 and provide proper disclosures regarding the impairment test which is undertaken on the
asset and what is the basis on which the impairment test is done. I know that a slight offset can
affect the financial position of the business and thereby effect the reputation of the business.
I would say that the management of the company needs to assess the amount which is
charged as impairment in order to ascertain whether the impairment charges which is portrayed
in the financial statement is showing true and fair view of the situation. In addition to this, proper
disclosures must also be made by the management of the company for ensuring that the users of
the financial statement has all the relevant information used for the process of taking decisions.