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The future value of ASSET values...is an extreme concern for auditors... We always need to assess...

The future value of ASSET values...is an extreme concern for auditors... We always need to assess whether the entity will recieve the expected benefit in the future as the Balance Sheet valuation presents. Discuss the importance of the Allowance for Doubtful Account valuation for Accounts Recievable and the Impairment process for Goodwill pertaining to the complexities involved in attesting as to whether the Financial Statements are:
a. Following GAAP
b. Adequately Disclosing Data
c. Consistency in the application of GAAP
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Answer #1

Whenever we have realized that a particular customer is not paying as on time then we create allowance on receivable. Every organisation form a rule to create receivable allowance. Companies based on ageing report create the allowances. If a company is using the accrual basis of accounting, it should record an allowance for doubtful accounts, since it provides an estimate of future bad debts that improves the accuracy of the company’s financial statements. Also, by recording the allowance for doubtful accounts at the same time it records a sale, a company is properly matching the projected bad debt expense against the related sale in the same period, which provides an accurate view of the true profitability of a sale.

Impairment of good will is that when carrying value in the books are more than its fair value.If the company decides it has too much goodwill, then goodwill is impaired. The company writes down goodwill by reporting an impairment expense. The amount of the expense directly reduces net income for the year.

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