Bcom 301 Communications: Reversal Of Assessment Answers

Answer:

Introduction

The term “reversal” for concerning the loss of impairment is taken to be recognised in form of losses or profits unless there are existent any relation with that of re-valued asset. Favouring such, the actions pertaining to entertain reversals are strictly taken to be prohibited in case of goodwill. The light is generally put over the concern in cases if there are any sorts of estimate changes for the determination of recoverable amount consulting the asset. Through such context, the following content would be evident for producing relevant content regarding loss reversal along with impairment losses. Hence, thesis statement would deal with aesthetics along with the subjective reasons for the reversal aspects in case of goodwill impairment.

Impairment loss for goodwill

Goodwill impairment is taken into consultation when an organisation is subjective of paying more amount than that of book value regarding any set of assets with making later adjustments over the goodwill book value (Bugeja & Loyeung, 2015:245-261). The concern of extension towards “carrying amount” for the asset being exceeding “recoverable amount” is sustained to comply with consideration of losses in impairment. Considering the assets that are concerned for carrying historical costs, impairment losses are taken to be recognised in form of expenses over immediate losses or profits. According to Tennyson & Akani, (2016:178-192), for the concern of impaired asset being a revalued one coming under IAS 16 or 38, then it can be treated in form of revaluation decrement.

For such, the recognition of impaired losses is taken to be viewed in form of comprehensive income and thus maintaining the reductions in asset revaluation surpluses. In words of Nawaiseh et al. (2016:111), in case of exceeding the amount of revaluation surplus, the loss remaining is taken to be in form of expenses immediately within loses or profits.

Analysis: Loss reversal

Aesthetics

In case of any presence of impairment reversals, the carrying amount with adjustment are taken through the possibility of not exceeding original carrying amount for the asset with proclamation of no losses of impairment. For such, the remaining life along with present methods of depreciations or that of residual value requirements are to be adjusted and reviewed in case of any indications for non-existence of impairment. As stated by Kabir & Rahman (2016:290-308), apart from such, the presence of both internal and external sources are also taken for indicating impairment losses consulting an asset rather than goodwill with no possibilities of existences. In case of any improvements regarding the estimates for determination of assets or recoverable CGU amount concerning last impairment loss, reversal of impairment loss is facilitated for loss recognised previously for the asset. As mentioned by André et al. (2018:707-725), for such the reversal is not taken into consideration within the generalised condition of market.

As for example, a purchase of $2 million building was made by Company X with estimated useful life being 20 years though usage of method of straight line depreciation (assb.gov.sg, 2018). With the construction of flyover in front of the building in 2009 by the government reduced building access and hence reduced the building value. Against such, estimation was incurred for selling the company at a price of $1 million against a cost of $50000. Through alternative ways, using the net cash flow present values would be beneficial for generating revenue of $1.2 billion. After determination of carrying amount and recoverable amount, an amount of $0.3 million is incurred. As per such, journal entry is taken as;

Table 1: Journal entry for Impairment loss

(Source: Created by author)

For the concern of reversing the impairment losses in case of goodwill, IAS 36 on a specific basis prohibits impairment losses reversals that are being recognised within previous periods of goodwill. As opined by Mazzi et al. (2017:268-312), favouring such, the reason stays positive through stating the increment of goodwill losses being prominent for increasing the internal goodwill. This would also be forecasted for the non increment of acquired goodwill that is purchased goodwill.  In opinion of Basu (2017:210-214), for such, internal goodwill is not permitted allowances as for being recognised in form of an asset hence accounting no increment or decrement consulting the revaluation, relative to goodwill.

Conclusion

From the above content, various conclusions can be derived. In case of impaired loss it can be concluded that the impairment loss remaining for the revaluation decrement is taken to be in form of expenses immediately within loses or profits over any concerned organisation. Concerning to that of loss reversal featuring the mentioned organisation example, it can be concluded that the effect of reduced valuation incurred an amount of $30000 as impairment loss while concerning to that of net cash flow values. Further it can be concluded that the reversal of goodwill impairment cannot be taken into play as it entertains the decrement of acquired goodwill with increasing internal goodwill hence coming with less output. A circumstance was concluded in case of presence of any external event having lower possibility of recurrence for accepting the reversal of impairment loss. For such, the concern stays with allowance of internal goodwill that would be effective for entailing the decrement or increment of revaluation asset.

References

André, P., Dionysiou, D., and Tsalavoutas, I. 2018, Mandated disclosures under IAS 36 Impairment of Assets and IAS 38 Intangible Assets: value relevance and impact on analysts’ forecasts. Applied Economics, 50(7), pp.707-725.

Basu, A. 2017, Impairment of Intangible Assets-An Effort to Convergence. International Journal of Engineering and Management Research (IJEMR), 7(5), pp.210-214.

Bugeja, M., and Loyeung, A. 2015, What drives the allocation of the purchase price to goodwill?. Journal of Contemporary Accounting & Economics, 11(3), pp.245-261.

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.

Mazzi, F., André, P., Dionysiou, D., and Tsalavoutas, I. 2017, Compliance with goodwill-related mandatory disclosure requirements and the cost of equity capital. Accounting and Business Research, 47(3), pp.268-312.

Nawaiseh, M. E., Al-Ibbini, O. A., and Al-nawaiseh, H. N. F. 2016, Impairment of Non-current Assets-Implementation and Disclosure: Evidence from Industrial Firms in Jordan. Advances in Management and Applied Economics, 6(4), pp.111-120.

Tennyson, O., and Akani, F. N. 2016. Assets Impairment Testing: An Analysis of IAS 36. African Research Review, 10(1), pp.178-192.

assb.gov.sg 2018, statutory board financial SB-FRS 36 reporting standard Available at: https://www.assb.gov.sg/docs/attachments/fr-assb_frs_after1Jan2014/SB-FRS_36_IE_2014.pdf [Assessed on: 2 September 2018]