The impact of the approach on the segment - Myassignmenthelp.Com

Question: Discuss aboutThe impact of the approach on the segment. Answer: Disclosure of impairment of assets The AASB 136 defines impaired asset of companies to be those assets whose market values are less than the values, which are recorded in the balance sheets of the concerned companies. If an asset is impaired, then the carrying value of the same is found to be larger than the value recoverable of the asset (Guthrie and Pang 2013). If there are indications regarding the presence of impairment in any asset of the company, then it becomes a responsibility of the concerned company to estimate the recoverable amount of the suspected asset at each accounting periods end. Though, impairment tests are carried out annually, however, in presence of high chances of impairment in any asset, the company can test the asset for impairment more frequently (Christensen and Nikolaev 2013). In some cases, if it becomes non-feasible for the company to calculate the recovering value of the concerned asset, then for the purpose of impairment calculation, the company can estimate the recoverable value of the particular cash-generating unit containing the concerned asset (Bugeja, Czernkowski and Moran 2015). There exists several indications, both external as well as internal, which provide evidences towards the presence of impairment of assets. Like that of the conduction of impairment tests on its asset, the procedure of disclosure of impairment in assets is also of immense significance and there exist several norms for disclosure of impairment for each of the different classes of assets, which are discussed in the following section of the essay, as per the regulations of AASB 136. By the term Class of assets, the groups of assets of similar nature, which are used for the operations of the concerned company are meant. Therefore, if impairment tests are taken for a class of assets in a company, then as per Para 126 of AASB 136, the company needs to disclose the amount of loss arising due to the presence of impairment, in the profit or loss, in the current period. The disclosure is also supposed to include the line item or items of the comprehensive income statement, which include the impairment loss. Along with these, the company also needs to disclose the reversal amounts for the impairment losses, which are recognized in that period in the profit or loss, along with the line items of the comprehensive income statements including those impairment losses. The disclosure also includes the impairment loss amount on the revalued assets, which are recognized in the other comprehensive incomes in the current period, and the reversal amount of the same on the revalued assets during that period. However, if a company reports segment information as per the AASB 8, then in each of their reportable segments, the company needs to disclose the impairment loss amounts, which are recognized in the profit/loss and also in the other comprehensive incomes of that particular period. Apart from that, the reversal amounts of impairment losses are also supposed to be included in their disclosure (Faras and Rodrguez 2015). The impairment disclosure of the companies, for each of the material impairment loss, which are recognized or are reversed in the current period, for any goodwill including asset or any cash-generating unit should include the details of the circumstances and events, which have led to the reversal, or the recognition of the loss arising out of impairment. These are in accordance to the Para 130 of AASB 136. The impairment loss amount, which are recognized or reversed, is also required to be disclosed. The disclosure also needs to mention whether the recoverable amount of the concerned cash-generating unit or the individual asset is the value in use of the same or its fair value less the costs (Bond, Govendir and Wells 2016). In case of the presence of the fair value less cost being the recoverable amount, then the basis, which has been used for the determination of the same, has to be mentioned in the disclosure of the company. In the cases where the recoverable value of the assets or the units are in use, then the disclosure needs to include the discount rates which are used in the current and the previous estimates of the value in use (if any). However, there lie several differences regarding the nature of disclosure for the individual asset and for the cash generating unit. In case of the individual asset, the disclosure should include the nature of the assets and also the reportable segment which includes the asset, as per the regulations of AASB 8. On the other hand, the disclosure for the impairment loss for a cash-generating unit should include the description of that unit, regarding its product line, business operations and the geographical domain (Kang and Gray 2013). Along with the same, the reversed or recognized impairment loss by the class of assets is also required to be included. There may be the presence of change in the assets aggregation for the purpose of identification of the cash-generating unit after the previous calculation of the recoverable amount of the same. In these cases, the disclosure needs to contain a description of the aggregation methods of assets (current and former) and the reasons of the change in the ways of identification of the cash generating units. There may be several companies which do not disclose the impairment loss in accordance to the Para 130. Then for aggregate impairment losses and the aggregate reversal of the same, which are recognized in that period, as per the assertions of the Para 131, the company needs to disclose the primary asset classes which are affected by these losses and those affected by the reversal of such losses. The disclosure should also include the circumstances and events, which has led to recognition or reversal of the concerned impairment losses (He, Evans and He 2016). Para 84 depicts the situations which may arise in case of the goodwill allocated cash generating units. According to this Para, if any part of the goodwill which is acquired during a particular reporting period, is not allocated to the concerned cash generating unit by the end of the concerned reporting period, then the disclosure needs to state the amount of the goodwill which is unallocated along with the reasons behind the same (Ji 2013). References Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairment decisions by Australian firms and whether this was impacted by AASB 136. Bugeja, M., Czernkowski, R. and Moran, D., 2015. The impact of the management approach on segment reporting.Journal of Business Finance Accounting,42(3-4), pp.310-366. Christensen, H.B. and Nikolaev, V.V., 2013. Does fair value accounting for non-financial assets pass the market test?.Review of Accounting Studies,18(3), pp.734-775. Faras, P. and Rodrguez, R., 2015. Segment disclosures under IFRS 8s management approach: has segment reporting improved?.Spanish Journal of Finance and Accounting/Revista Espanola de Financiacion y Contabilidad,44(2), pp.117-133. Guthrie, J. and Pang, T.T., 2013. Disclosure of Goodwill Impairment under AASB 136 from 20052010.Australian Accounting Review,23(3), pp.216-231. He, L., Evans, E. and He, R., 2016. The Impact of AASB 8 Operating Segments on Analysts Earnings Forecasts: Australian Evidence.Australian Accounting Review,26(4), pp.330-340. Ji, K., 2013. Better late than never, the timing of goodwill impairment testing in Australia.Australian Accounting Review,23(4), pp.369-379. Kang, H. and Gray, S.J., 2013. Segment reporting practices in Australia: Has IFRS 8 made a difference?.Australian Accounting Review,23(3), pp.232-243.