Essay on Impairment Loss for Cash Generating Units (Finance)
VerifiedAdded on 2019/11/19
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Essay
AI Summary
This essay provides a comprehensive overview of impairment losses for cash generating units (CGUs), excluding goodwill, within the framework of Australian Accounting Standards Board 136 (AASB 136). It defines impairment losses and CGUs, emphasizing the importance of these concepts for accurate financial reporting. The essay details the measurement process, including the calculation of recoverable amounts (fair value less costs to sell and value in use) and carrying values. It explains how impairment losses are recognized and allocated, with a specific focus on the order of allocation (first to goodwill, then to other assets). Furthermore, the essay discusses the reversal of impairment losses and the conditions under which this can occur. The essay concludes by highlighting the significance of regularly assessing CGUs for impairment indicators to avoid overvaluation of assets and ensure financial statements reflect a company's true value. It includes a practical example of impairment loss calculation and the related journal entries.
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