Purpose of the impairment test for assets

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Reference no: EM132205221 , Length: word count:2500

You are an experienced accountant working for a newly formed publically listed company, Five Star Ltd.

You are required to apply the Australian Accounting Standards equivalents of the international accounting standards. The management of Five Star Ltd seeks your advice in relation to the application of AASB 136 Impairment of Assets.

Required

A. Write a report to management, specifically explaining:

1. the purpose of the impairment test for assets

2. when to undertake an impairment test

3. how the existence of goodwill will affect the impairment test

4. the basic steps to be followed in applying the impairment test for (a) individual assets and (b) cash generating units

5. How to account for reversals of Impairment losses.

B. Management has also requested that you explain, by example, how other companies are applying AASB 136. So further to the above you are also required to consider the financial statements of a reporting entity (BlueScope Steel Ltd) and indicate to management the effect of impairment testing on these financial statements. In doing this you need to indicate to management in an appendix to the report in A above, various aspects of the Annual report from BlueScope Steel Ltd:

1. The measurement basis for assets

2. What are the company's assets, including Property, plant and equipment and intangible assets? Do they have goodwill?

3. Have any assets been impaired? Is there an explanation for this?

4. Has any reversal of impairment losses occurred?

5. What is the effect of asset impairment/reversals of asset impairment on the balance sheet and the income statement? (You will need to look at relevant notes to the accounts.)

Reference no: EM132205221

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