MP212 Financial Accounting and Reporting | Impairment Test

The announcement regarding the impairment of assets clearly declare that this would be the important part of accounting treatment that a firm has to do, as testing of assets that should be impairment mentioned in the financial report of company. The report declares the complete information regarding the importance of the impairment of the assets for the transparent view point of the assets.

Announcement Of Asic Regarding Impairment 

According to the announcement done by ASIC the directors and the auditor are responsible for the same terms regarding that, they are as follows:

The directors and auditor make sure that the company's speculation regarding the cash flow of assets must be appropriate that shown in the books of accounts. All the directors needs to evaluate their financial statements and recorded accounts as per AASB 136 so that they could keep the business more transparent towards the stakeholders.

The difference between the actual value and the value that shown in the books are evaluated adequately and in a proper manner by considering adequate cash flows regarding the assets of company.

For doing the evaluation of impairment of assets in Myer Holding Company no speculative data of cash flow considered, only adequate and actual cash flow is considered while evaluating the impairment of assets.

The test of impairment of assets of Myer Holding Company contains the reassessed value of assets and liabilities that might be influenced by the internal and external forces that leads to the adverse or different result of testing.

The risk included in the assets and the places where it deemed to be occurring must decide before deciding the discount rates on risks of Myer Holding Company. The discounted rates are related with the different activities allied with different profit producing activities under different type of risks included.

The cost of issuance must be adequate and affordable in nature regarding to the assets.

The actual value of assets and liabilities that has to be mentioned in the accounting books must be resolute. The process of costing must be ratified through cost drivers.

Evidences That States That Impairment Testing Of Assets Is Necessary

Evidences of testing of impairment of Myer Holding Company refers to the situation where the company are supposed to be think about the testing of impairment of assets considered in the books of accounts in consequential manner. The evidence may be based on external or internal aspects that lead to the impairment of assets. The evidence that considered is as follows:

Internal Evidences

It includes any substantial harm that perceive in the Myer Holding Company recently.

All the assets of Myer Holding Company are not operated according to the performance set for them.

The operating cost of company increases unexpectedly at an uncertain level of the firm.

Assets of Myer Holding Company are to be superannuated according to the requirement of the firm as per the plans set previously. In the annual report, these ideas are to be considered for the business.

The performance of Myer Holding Company is not up to mark that is estimated and making unexpected increase in the cost.

External Evidences

There are some of the external factors of Myer Holding Company which might evidence the impairment testing need.

The unexpected increment in the interest rates in the market affect the discount rates which make an adverse fall in the value of the assets that are to be used in the firm.

New technology, procedures, rules or economy introduced in the market that leads to the new expansion in the assets that already in use of the firm.

It includes for putting the carry forward value of assets on the excessive side in the balance sheet over the market capitalization value of Myer Holding Ltd.

The Process Required To Be Addressed In Determining Any Asset Impairments That Might Be Necessary

Due to rapid changes, decreasing in the valuation of assets, impairment testing helps the company to find out or evaluating the actual value of assets that are to be mentioned in the books of accounts of a company. Determining the evidences is not only the way to cure the problem, the company may determine by certain processes whether the impairment test is to be done or not. The following steps are to be included to find out whether the impairment test is necessary or not:

In the first step, we should check the evidences as they are as much compatible and strong enough that on the basis of them the impairment tests of assets are to be done related to the cash flow of assets.

The second step consist that the company may evaluate various required elements related to this, that considered the impulsive value of tangible and non-tangible assets are doing the comparison between the value of using at present and future after sale value.

The third step, considered whether the valued amount of assets that shown in the books of accounts is less than the impulsive amount of assets that should be determined before.

After determining, whether the assets are to be impaired or not, the company needs to maintain a separate account of losses in profit and loss account that occur during the impairment of assets.

Information Required To Determine The Impairment Of Assets

The following information is to be determined in the impairment of assets:

Myer holding's evidences declared that there is the requirement of impairment of assets in their company.

The real impulsive value of assets shows the market situations.

Real value and the value that use in books of accounts is required for determine the actual impulsive value of the assets.

The impairment of assets is to be compared with the previous impairment, and the valuation of impairment should be analyzed.

It also considered that the clients of the company are having updated knowledge regarding the records of assets and liabilities.

Management's Flexibility When It Comes To Impairment Decision

The management has the right to gather information from any source or any aspects that is to be needed in the impairment of assets. Wherever, the evidenced collected by the administration regarding the impairment of assets must determine whether the impairment is necessary or not, if there is no requirement then the administration have no right to take a decision regarding this. Only the firm will do impairment of assets if it is needed to be done. The administration cannot back step of doing impairment of assets when it is necessary under the rule AASB 36, Impairment of assets. This will allow the firm to maintain the records of assets and liabilities that may help the shareholders for taking the further decisions. But, if the management is in profit then the impulsive amount is calculated by using market value rather than using real value and all this is manipulated and make approachable afterwards.

Conclusion 

Hence, if the assets of the organization needs to impaired then there is no other option that will resolve this situation rather than impairment of assets. After evaluating the annual report of company, it is inferred that all the accounting treatment regarding the impairment of assets is done by Myer Holding. As per the accounting rules issued by the Australian Securities and Investment Commissions (ASIC), Myer has prepared an attentive and subjective report of financial information to identify the true recoverable value of the assets and liabilities recorded in the financial statement of company.

References

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