Question

Describe the impact of asset impairment of property, plants, and equipment or goodwill to financial statements for entities across three different industries. Discuss similarities and differences and why these occur.

Answer 1

Business assets should be tested for impairment when a situation occurs that causes the asset to lose value.Certain intangible assets ,such as goodwill are tested for impairment on an annual basis.. Impairment losses can occur foe a variety of reasons: physical damage to the asset , a permanent reduction in the market value ,legal issues against the asset , and early asset disposal.An impairment loss is recognised through a journal entry that debits the loss on impairment ,debit the asset's accumilated depreciation and credits the asset to reflect its new lower value.

IMPAIRMENT RECOGNITION

An impairment loss is recognised and accrued to record the asset's revaluation .once an asset has been revalued ,fluctuations in market value are calculated periodically. Certain intangible assets , such as goodwill are tested for impairment in an annual basis.

Two tests areperformed to determine the value of impairment ,they are recoverability and measurement method.The IAS 36 applies to all of the following assets:

• land
• building
• machinary and equipment
• investment property carried at cost
• intangible assets
• goodwillinvestments in subsidiaries ,associates,and joint ventures.
• assets carried at revalued amounts under IAS 16 and IAS 38

DISCLOSURE BY CLASS OF ASSETS

• Impairment losses are recognised in profit and loss account
• impairmrnt losses reversed in profit and loss
• Impairment losses on revalued assets recognised in other comprehensive income
• Impairment losses on revalued assets reverses in the comprehensive income .