Corporate Accounting in Australia Fenchs â€Myassignmenthelp.Com

Question: Discuss About The Corporate Accounting In Australia Fenchs? Answer: Introduction Impairment loss refers to the expenditure and depreciation rate a business is likely to experience after investment on an asset(Dagwell et al., 2015). Machinery, vehicles, and equipment are classified as asset which depreciate their physical value over time, thus they are classified as impairments and their impairment loss must be calculated and established. Explain the Need for an Impairment Test Impairment test involves extensive disclosures which I focused towards the identification of factors and losses which may be incurred by investing in an Asset(AASB, 2007). The impairment can be calculated for both assets to be used in future and assets which intend to be sold for a profit after appreciation. Each asset will have an investment and maintenance and depreciation cost which must be identified so that the impairment can be calculated. Impairment tests are critical towards determining appreciation and depreciation rates of assets which is a critical requirement for all businesses so as to estimate the cost they can expect to incur after investment on an asset, equipment or after expanding. In many situations, impairment tests on investments are not calculated in advance leading to the investor incurring unexpected losses which places additional stress on the individual or business which considered redundancy costs incurred during the period after investment till utilization of resale a loss. Explain When an Impairment Test Should Be Undertaken Impairment tests are undertaken on assets which are non-recoverable thus allowing the investor to calcite the cost they can expect to incur after investment towards maintaining and upkeep of the invested asset. This means that the impairment test requires being undertaken before investment on the asset to help determine the after investment cost the business is likely to incur until use of the investment. Impairment tests require to be done before investment on an asset but the impairment test can be revised at a later stage invariants change which may influence the impairment costs(IAS, 2017). It is important for impairment cost to be undertaken before the business invests on any asset so as to help the business determine additional maintained and depreciation costs they will incur after the purchase of manufacturing of the asset. This can help the business focus its attention towards investing on an asset at an appropriate stage which would reduce the cost incurred for the investme nt and maintained till use. Impairment plans also help determine net cost incurred after investment on an asset which helps determine the right time to invest in an asset. Outline the Components of the Impairment Test The asset is classified as impaired when the recovery among exceeds the carry among. This means that the sale price is likely to be lower than the purchase price but the products are labels an asset due to being a key element towards business operations and functionality. Key components of impairment tests include calculation of the carry amount and estimations of the recoverable among. The difference is noted to be the impairment loss a business incurred after investment on the asset(IAS, 2015). Carrying amounts are calculated by taking into consideration internal and external indicator which influences the carrying cost. Describe How to Account For an Impairment Loss for a Single Asset To determine the impairment loss on a single asset it is critical to calculate the total CA and RA the business is likely to incur after investment on an asset. The carry cost includes investment, maintenance, storage and all other costs a business is likely to incur after investment on the asset. Recovery amount is the amount the business is likely to recover for the asset once sold. In most situations the RA I lower than the investment costs despite the products being classified as an asset. Once the amounts have been calculated the business than being able to calcite the impairment loss to help determine the total cost the business is likely to incur while holding the asset and how much can be expected after the sale. Describe How to Account For an Impairment Loss for a Cash-Generating Unit The impairment loss is accounted by determining all expected expenses a business I likely to incur after investment on an asset. This data also includes the depreciation rate on an asset over the projected lifetime. Once calculated the information can be compiled to determine the total costs a business will incur after investment and ownership of an asset and also identify the recoverable amount the business can expect from the asset(AASB, 2007). This data can then be used to help determine the cost the business is likely to incur after investment on the asset on a yearly or monthly basis. The data can then be used to calculate the final asset cot on the business. Impairment loss calculation is critical towards determining cost a business will incur after investment but will also help determine important data related to the right time to purchase an asset taking into consideration all the costs the business is likely to incur thus determining the best time to invest in an asset. Explain When an Impairment Loss Can Be Reversed and How to Account for It An impairment loss cannot be reversed due to the impairment costs being the cots an organization of investor incurred after investment on an asset. The impairment costs durations and the amount recovered can be altered but this also means the asset is losing its value as it continues being utilized for a longer period(IAS, 2004). While its possible to utilize asset for a long period when they recover their investment cost leaving only maintenance and other upkeep costs they cannot be reversed or considered for goodwill re-embossment. Once the asset investment has been covered, only the recoverable amount can be reflected on the businesses list of assets. Identify the Disclosures Required In Relation To Impairment of Assets To undertake an accurate impairment test it is critical for the organization and stakeholders to evaluate and disclose all requirements with relation to the asset management, maintenance, and depreciation. Each asset should have a clearly outlined cost management plan which would allow for the business to determine the exact amount of costs being incurred to manage, maintain and operate the assets(Weil et al., 2013). It is vital all details are clearly outlined so as to ensure the accurate calculation of impairment loss related to each asset. Conclusion An asset refers to an investment which is likely to generate a profit for the business but certain assets also depreciate over time thus are classified as an impairment to a business. Their depreciation and cost must be a calculation to help determine their return and benefit towards the business as a physical asset and not their contributions towards generating income. Reference AASB, 2007. Impairment of Assets. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB136_07-04_COMPapr07_07-07.pdf [Accessed 19 Sept 2017]. AASB, 1., 2007. Impairment of Assets. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB136_07-04_COMPapr07_07-07.pdf [Accessed 19 Sept 2017]. Dagwell, R., Wines, G. Lambert, C., 2015. Corporate Accounting in Australia. Fenchs Forest: Pearson Higher Education AU. IAS, 3., 2004. Impairment of Assets. [Online] Available at: https://www.iasplus.com/en/standards/ias/ias36 [Accessed 19 Sept 2017]. IAS, 3., 2015. IAS 36 IMPAIRMENT OFASSETS Fact Sheet. [Online] Available at: https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/reporting/reporting-ifrsfactsheet-impairment-of-assets.pdf?la=en [Accessed 19 Sept 2017]. IAS, 2017. Impairment of Assets. [Online] Available at: https://www.iasplus.com/en/standards/ias/ias36 [Accessed 19 Sept 17]. Weil, R.L., Schipper, K. Francis, J., 2013. Financial Accounting: An Introduction to Concepts, Methods and Uses. Cengage Learning