Corporate Accounting Assignment Solution - University Name, Semester 1

This document presents a comprehensive solution to a corporate accounting assignment, addressing key concepts such as fair value measurement under IFRS 13 and AASB 13. The assignment delves into the valuation of assets and liabilities, emphasizing the importance of market participant assumptions and the selection of appropriate market prices. It also examines depreciation methods, contrasting cost models with fair value models, and explaining their implications for financial reporting. Furthermore, the solution explores impairment testing, focusing on cash-generating units and their role in determining asset values, including detailed explanations on how to calculate impairment losses and consider cash flow independency. The document references relevant accounting standards and provides a bibliography of supporting sources.

Running head: Corporate Accounting
Corporate Accounting
Name of the Student
Name of the University
Author Note

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Corporate Accounting
Table of Contents
Question No 1............................................................................................................................2
1A...........................................................................................................................................2
1B...........................................................................................................................................2
1C...........................................................................................................................................2
Question No 2............................................................................................................................3
Question No 3............................................................................................................................4
3A...........................................................................................................................................4
3B...........................................................................................................................................4
3C...........................................................................................................................................4
Reference and Bibliography.......................................................................................................5

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Corporate Accounting
Question 1
1A
Each company should value their liabilities and asset in regards with the provision of
IFRS 13. It should also follow the disclosure requirement company has to follow in the
valuation of asset and liabilities. Fair value of asset and liability is the net value which
company is able to have by selling it asset in the market as well as how much company pay
for the obligation which it is having in business. Company should able to take the best quoted
price in the market as fair market value of company. This provision also states about different
market alternative which is able to the company but it does not show a proper market
participant to business. AASB 13, in paragraph 22 it clearly says company should not take in
consideration the market participants but should have knowledge of the assumption taken by
market participant in regards of liability and asset.
1B
Market participants assumption should able to be consider while taking the
assessment of liability and asset of organization. Company should also able take into
consideration the discounting factor and expected cash flow in computation market value of
company business. Risk factor is to be consider by the company when the company is taking
market participant assumption fair value of business as it is mention in Appendix A of AASB
13. Inherent risk also be considered by the company, it should also know about the rational
behaviour which the company has in market participant of business.
1C
Market price of liability and asset is been considered by business in regards of fair
value of liabilities and asset of busienss as it is stated in AASB 13 and IFRS 13. If company
is able to transfer any similar object than it able to consider the recent price as its fair value

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Corporate Accounting
and if it does not know the value of the object than it should able to take proper assumptions
while considering the market participant in to consideration in the assumption (AASB 13:
Appendix A). As the company find out similar object of price so this should be considered
while company is able to do fair market valuation technique. So, in such kind of situation
company is to take the price quoted by market participants.
Question No 2
As per AASB is concern an entity should depreciate its asset by historical cost and
also it should not be using any different method in the business. It should not take the
expenses which is spend by the company upon the utilization of asset, it will increase the cost
of asset so company should avoid taking such expenses into consideration. As per other
provision organization should consider depreciation as an expense so it should go in Profit
and loss statement of business, so the inflation should be same in regards of the expenses
incurred by the company, as this provision should not be taken into consideration by
company using historical cost.
Company can value the asset with the help two types of model which are fair value
model and cost model. Company always select cost model as this model help them to do the
accounting in regards of sunk cost in to consideration. Fair value model takes into
consideration of time affect upon the asset as it considers all the increase and decrease which
is happening in regards of the asset so this only happen in theoretically and not in practically
in the business. Company always try to make proper information for the shareholder so that it
can able to give clear information to the shareholder, as cost model is not having much
complexity in compare to fair value model, so this also a reason why company is able to
consider the same for the valuation of the asset.

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Corporate Accounting
Question No 3
3A
In regards of the impairment testing is consider so to carry the company to know the
outflow and inflow of cash, related to object of organization. The smallest group of asset is
termed as Cash Generating Unit, that can be computed with help of inflow and outflow in
regards of object. Business can find the cash generating unit in regards of one single asset of
company (Guthrie & Pang 2013). This group is usually having its own asset and liability and
it is not related to any other group of assets so this signify that it able to have an independent
feature in it. As pe the impairment of losses is consider company is able to calculate that with
the comparison of fair value of asset less disposal cost and net recoverable asset of the
company. As the company want to know the value than it should consider estimated cash
flow and the risk associated with it and whole calculation should be based upon the
forecasted figure and future cash flow and it is the reason why cash generating unit is needed
for impairment testing.
3B
To know about the independency factor of cash flow, business is able consider to
know about the Cash Generating Unit. As per Cash Generating unit is consider of Saferide
bus company it should take the route and number of bus for the calculation of the same. As
per case the business can able to have specific route for each bus as the so organization can
find the net cash flow independently in regards of each bus than that can be consider as Cash
Generating Unit of the company. So it should able to take into consideration of the number of
bus, route and business operation to able to get an proper idea of cash generating unit of the
company.

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Corporate Accounting
3C
Business have to identify each route cash flow independently but it may not be to
know the cash flow from each bus, so it will hard for the company to know the cash
generating unit for each bus.

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Corporate Accounting
Reference and Bibliography
AASB, C. A. S. (2015). Investment property.
Aasb.gov.au. (2019). Retrieved 9 August 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB13_08-15.pdf
André, P., Dionysiou, D., & Tsalavoutas, I. (2018). Mandated disclosures under IAS 36
Impairment of Assets and IAS 38 Intangible Assets: value relevance and impact on
analysts’ forecasts. Applied Economics, 50(7), 707-725.
Australian Accounting Standards Board. (2015). AASB 13: Fair Value
Measurement. Melbourne: Author.
Banker, R. D., Basu, S., & Byzalov, D. (2016). Implications of impairment decisions and
assets' cash-flow horizons for conservatism research. The Accounting Review, 92(2),
41-67.
Linnenluecke, M. K., Birt, J., Lyon, J., & Sidhu, B. K. (2015). Planetary boundaries:
implications for asset impairment. Accounting & Finance, 55(4), 911-929.
Sinclair, R. N., & Keller, K. L. (2014). A case for brands as assets: Acquired and internally
developed. Journal of Brand Management, 21(4), 286-302.
Yallwe, A. H., & Buscemi, A. (2014). An era of intangible assets. Journal of Applied
Finance and Banking, 4(5), 17.