Question

It is common for common exhibiting indicators of impairment not to recognise an asset impairment in the financial statements.  This is identified in the academic literature (e.g., Bond, Govendir and Wells, 2016) and it has been identified as a concern by ASIC.

Required:

1. Discuss the reasons why firms might not be recognising asset impairments

Answer tips:

• FV >VIU
• Estimation of cash flows
• Growth in cash flows
• Discount rates
• Contracting incentives….

Answer 1

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