Accounting Standards & Regulation Free-Samples -Myassignmenthelp

Questions: a.WithreferencetoMyeroutlinewhatevidenceistherethatimpairmenttestingofassetsisnecessary; b.WithreferencetoMyeroutlinetheprocessesrequiredtobeaddressedindetermininganyasset impairmentsthatmightbenecessaryc.WithreferencetoMyeroutlinetheinformationneededindeterminingassetimpairmentsd.Evaluatetheflexibilitymanagementhasavailableinthedeterminationofassetimpairments. Answers: ASIC Media release 17 -162 ASIC through their Media Release 17 162, approached that the all the organization who are listed under the ASX, shall prepare their financial statement with the consideration that it shall fulfil the purposes of the users. To be more specific, the financial report shall be prepared with transparency and in accordance with the conceptual framework, so that the statements can be understood by the external as well as the internal users clearly and it must be able to fulfil the requirements of the users. It is observed by the ASIC that most of the companies use improper assumptions while preparing their accounts for various transactions like recognition if liabilities or revenues. As per the statement of John Price, the commissioner of ASIC, the auditors shall analyse the accounting strategies with regard to the statements of previous period (Aasb.gov.au 2017). As per the AASB 136 on Impairment of assets seeks to assure that the assets in the balance sheet shall not be carried out in the value which is more than the recoverable value of the asset. For the purpose of impairment, the recoverable value and fair value of the asset less the cost of disposal must be measured. The impairment loss is the difference between the recoverable amount and the fair value of the asset. As per the AASB 136, the organization shall carry out the impairment test at least once in each year. As per Para 12 14 under AASB 136, some indications are considered for impairment of any asset. However, if any indication for impairment is found with regard to any if the asset of the company, the management shall immediately test the asset for impairment (Kabir and Rahman 2016). Various indications of impairment are as follows Internal sources It is established that the asset became obsolete or it is damaged physically The asset or the CGU of the asset is required to be restructured or it is observed that the asset is kept in idle position for long run While using the asset, the method of use is significantly changed. External source The technological, environmental, market and legal circumstances of the operating environment of the entity has been significantly changed The assets carrying amount exceeds the capitalization of the market Significant change is there with regard to the market rate of interest or market return Owing to normal wear and tear the value of the asset changed considerably. a.Evident of impairment with regard to Myer Holdings Ltd Asset flow if the impairment test is carried out taking into consideration the asset flow of various stores of Myer, it can be recognized that that no indication is there with regard to impairment for any of the stores as there is no significant change noticed for past few years. Therefore, indication of impairment is not established. Turnover of asset taking into consideration the turnover of assets, it is identified that the turnover is ranged from 1.40 to 1.80. Therefore, significant shift is not there that can establish the indication of impairment (Investor.myer.com.au 2017). However, though above tests do not recognize any asset for impairment, it identified that to compete with the Amazon, Myer planned to change the outlook of the departmental store at Frankton. Under the planning they want to change the traditional black and white get-up of the store with the vibrant yellow colour. Further, the uniform of the store staffs will be changed from the traditional one. Moreover, the storage system will be altered in such way that will give more space for storage. All these significances will be regarded as partial restructure as per AASB 136, which is regarded as the internal source of information for the indication of impairment of the store (Malone, Tarca and Wee 2015). Therefore, the store in Frankton shall be tested for impairment. b.Process of determining impairment For calculating value or amount of impairment of assets when there is any indication of impairment of any assets of organization, in such event, it is essential to measure the carrying value of assets and value in use. The approval of assets by the management of company regarding assets forms the basis of forecasting the cash flow generated by assets. Forecast of cash flow is generally for long-tem. Management make use of terminal rate of growth for calculation of cash flow for long time that is five years (Christensen et al. 2015). Following assumptions have been made for the calculation of cash flow generated by assets and they are as follows: Pre discount rate has been assumed to be at 14.4% Terminal growth rate is assumed to be at 2.5% Rate of operating margin concerning goods profit are assumed to be at 39.5%. A separate evaluation of each of stores of company is done in order to recognize and establish impairment requirement. Moreover, forecasting of cash flow generating from assets is done based on budget of cash generating unit. Calculation of amount of impairment is doneif there is establishment of indication of impairment. Value in use and carrying value of asset are used for calculating amount of impairment (Wang 2014). c.Information relating to determination of impairment In order to make the recognition of loss associated with impairment and to carry out test of impairment, it is required in part of organization to make detail disclosures. It is crucial to determine the value of impairment and the reason is attributable to fact that impairment is made using recoverable value and through value in use. Under the revenue statement, identification and recognition of loss associated with impairment is treated as expense. Under balance sheet, such amount is deduced from asset closing value of assets. Impairment of cash generating unit of assets is regarded for the purpose of impairment when the recoverable amount of assets is less than carrying amount of assets. It is necessary for organization to reverse the amount of loss associated with impairment in previous accounting period concerning goodwill or any assets. This is done in the event if the forecasted value of the recoverable value of assets that are impaired changes (DeZoort et al. 2017). d.Flexibility Myer Holding Limited management for determining impairment It is not essential for management of company to be expert in accounting as per Australian securities and investment commission. In such cases, management of organisation can seek help from accounting firms or by hiring accounting experts. When the forecasted or projected value relating to accounting does not tally with the required or actual outcome, it is required by them to discuss matters with accounts by conducting in depth analysis. Data in financial statements can be presented with more clarity when such analysis is conducted (Pacter 2014). As per the requirement of Australian accounting standard board 136, the facts ascertained in the given case of Myer Holdings Ltd. In such case, it becomes essential for management to carry out test of impairments at least once in a year. Furthermore, for measuring the amount of loss related to impairment in the event of any indication of impairment, it I required by company to instantly measure the value in use and recoverable value. From the analysis of case, it is regarded that for carrying out impairment tests, Myer Holdings Ltd is very adjustable. Survey regarding carrying value of assets is conducted by organization for each of store and existing signs of impairment is distinguished (Albu et al. 2014). Test of impedance is guaranteed by organization as per AASB 136 fundamentals. Moreover, various levels of certainties such as estimation of impairment is decided by organization. Therefore, it can be concluded that companys management is flexible when it comes to determine the los s of impairment and carrying out impairment tests. References: Aasb.gov.au. 2017. Australian Accounting Standards Board (AASB) - Home. [online] Available at: https://www.aasb.gov.au/ [Accessed 26 Aug. 2017]. Albu, C.N., Albu, N. and Alexander, D., 2014. When global accounting standards meet the local contextInsights from an emerging economy.Critical Perspectives on Accounting,25(6), pp.489-510. Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. Incentives or standards: What determines accounting quality changes around IFRS adoption?.European Accounting Review,24(1), pp.31-61. DeZoort, F.T., Wilkins, A. and Justice, S.E., 2017. Call for papers: The limits of accounting regulation.Journal of Accounting and Public Policy,45, p.30Z. Investor.myer.com.au. 2017. Myer Investor Relations. [online] Available at: https://investor.myer.com.au/Investor-Centre/ [Accessed 26 Aug. 2017]. Kabir, H. and Rahman, A., 2016. The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia.Journal of Contemporary Accounting Economics,12(3), pp.290-308. Malone, L., Tarca, A. and Wee, M., 2015. Non-GAAP earnings disclosures and IFRS.Accounting and Finance. Pacter, P., 2014. Global accounting standards-from vision to reality.The CPA Journal,84(1), p.6.Page, M., 2014. Business models as a basis for regulation of financial reporting.Journal of Management Governance,18(3), pp.683-695. Wang, C., 2014. Accounting standards harmonization and financial statement comparability: Evidence from transnational information transfer.Journal of Accounting Research,52(4), pp.955-992.