Reversal Of Impairment Of Individual Assets †Myassignmenthelp.Com

Question: Discuss About The Reversal Of Impairment Of Individual Assets? Answer: Introduction With the increasing ramification of economic changes and complex reporting frameworks, impairment test is implemented to identify the true and fair view of assets of organization. It is observed that IAS- 136 covers all the rules and accounting standards while Recognize and measurement of Impairment loss for individual assets and reversal of Impairment loss of individual assets in the balance sheet of organization. This report reflects all the provisions and rules implemented by organization for reporting reorganization and measurement of reversal of Impairment loss of individual assets such as tangible or intangible assets in the financial statement. This impairment test implemented by organization should showcase the true and fair view of assets in easy and determined approach (Dagwell, Wines, and Lambert, 2011). These all the assets should be recorded at cost values and should be compared with its market value while implementing impairment test. The accounting principles permit re valuation of assets of company on periodic basis and allowing reversal of Impairment loss of individual assets with view to showcase the true and fair view of assets. If company wants to implement Reversal of Impairment loss of individual assets then it has to follow all the rules and regulations shown under ASAB 136. However, in case to compute the impairment loss for cash generating units, this process becomes cumbersome. Reversal of Impairment loss of Impairment Test Purpose and Objectives The main objective of implementing reversal of Impairment loss of individual assets is to identify the true and view of assets and recognize and measurement of Impairment loss for individual assets and charging the computed amount from the profit and loss accounts of company. It is evaluated that many organizations showcase the false information to its stakeholder by reflecting wrong value of its assets in its book of accounts. This impairment test and disclosure requirement assist in identifying and recognize and measurement Reversal of Impairment loss of individual assets loss for individual assets. This reversal of Impairment loss of individual assets allows company to revalue of its assets and charge its impairment loss from its goodwill and other cash generating units. It is observed that while implementing impairment test if company finds upward revision of its assets value then it will result to impairment profit (Dagwell, Wines, and Lambert, 2011). However, due to sluggish ma rket condition or foreign exchange risk or reduction of value, assets of company got reduced and resulted to decrease in overall assets of company. It is evaluated that if reversal of Impairment loss of individual assets is done on the basis of impairment loss then it will destruct the value of assets of company and vice-versa ( Dagwell, Wines, and Lambert, 2011). It is evaluated that while in reversal of Impairment loss of individual assets, company needs to find out the market value of assets an comparison needs to be made to identify, recognize and measurement of Impairment loss for individual assets (Ernst Young LLP, 2015). If carrying amount is low then differences in value of individual assets then reversal of Impairment loss of individual assets should be done from the carrying assets of companyn(AASB 136, 2009). Reversal of Impairment loss of individual assets As per the provisions of AASB 136, all the loss arise from the individual assets while tested for impairment then all the impairment loss should be reversed to cash generating units after deducting the same amount from the goodwill (AASB 136, 2009). However, in case of cash generating units, this process become cumbersome. It is evaluated that cash generating units are the groups of assets which generate cash for the organization. In case of identifying, recognize and measurement of Impairment loss for individual assets this situation, the net realizable value of the assets on individual basis is computed and impairment test is applied to evaluate the impairment loss and profit (AASB 136, 2009). In case of recognize and measurement of reversal of Impairment loss of individual assets for individual assets, impairment loss is occurred when the market value of assets is less than the market value of assets shown in the books of accounts of company. Reversal of Impairment loss of individual assets is done by deducting the impairment loss from the goodwill and then from other cash generating units (AASB 136, 2009). Allocation of Goodwill to Cash Generating Unit while implementing reversal of Impairment loss of individual assets The AASB 136 states the impairment test and how company could implement proper impairment test in its reporting frameworks for rreversal of Impairment loss of individual assets (AASB 136, 2009). It is evaluated that while recognize and measurement of Impairment loss for individual assets, company needs to set off all of its impairment loss from its goodwill shown in the books of accounts. After that all the remaining loss will be charged from the cash generating units in determined approach (AASB 136, 2009). Impairment Test on individual assets It is observed that if individual assets shown in the books of accounts of company is shown at more than its market value then company has to reduce its amount to its market value. Charging the same with the goodwill and other cash generating units will be covered under reversal of Impairment loss of individual assets. This level of reduction in the assets value should be treated as impairment loss while reversal of Impairment loss of individual assets. However, there is proper procedure and accounting rules given while implementing impairment loss in organization (AASB 136, 2009). Reversal of Impairment loss of individual assets of Impairment Loss to Cash Generating Unit The amount of loss occurs will be deducted from the cash generating units of company after following all the rules and standards of IAS 136. It is observed that under the Reversal of Impairment loss of individual assets, impairment loss of individual assets should be charged from the goodwill and after that rest of the impairment loss should be charged from the cash generating units. This level of reduction in the individual assets of company will showcase the true and faire view of assets in determines approach (AASB 136, 2009). Conclusion After identifying the rules and regulation for reversal of Impairment loss of individual assets, it could be inferred that each and every organization should implement impairment test on periodic basis. This will help organization to explicit the true and fair view of its assets in determined approach. Now in the end, it could be inferred that if company wants to disclose the true and fair view of its assets then it should implement impairment test on periodic basis and charge reversal of Impairment loss of individual assets as per the IAS-136. Computation of impairment loss for individual assets of Gali Ltd Plant 268000 Equipment 62000 Fittings 39000 Inventory 17000 Goodwill 14000 Total 400000 B. Recoverable amoun 358000 C. Impairment Loss (A-B) 42000 Account Titles Debit Credit Impairment Loss 42000 Goodwill 14000 Plant (note below) 10168 Equipment (17832/ 101000)*62000 10946.38 Fittings ((17832/ 10100)*39000 24837.43 Inventory Nil (Being impairment loss recognized) Profit and Los 42000 Impairment L 42000 (Being impairment loss charged to profit and loss account) Impairment on plant individually (26800-257832) 10168 Impairment loss on plant cannot be allocated more than $18196 References AASB 136. 2009. Impairment of Assets. [Online]. Available at: https://www.aasb.gov.au/admin/file/content102/c3/AASB136_07-04_ERDRjun10_07-09.pdf [Accessed on: 01 January 2017]. Dagwell, R. Wines, G., and Lambert, C. 2011. Corporate Accounting in Australia. Pearson Higher Education AU. Ernst Young LLP. 2015. International GAAP 2016: Generally Accepted Accounting Principles under International Financial Reporting Standards. John Wiley Sons.