Question

Discuss how the current economic restrictions caused by COVID-19 affect Australian reporting entities in applying AASB 136 Impairment of Assets.

Need two examples to relate to the essay topic of discussion as stated above.

Thank you.

Answer 1

As Per AASB 136 Impairment of Assets

AASB 136 Impairment of Assets needs associate entity to assess different finite non-financial assets for impairment once impairment indicators exists, whereas goodwill, indefinite-lived intangible assets and intangible assets not however prepared to be used ar needed to be tested for impairment a minimum of per annum. elaborate samples of indicators of impairment ar enclosed in AASB 136.12. The most relevant indicators ar enclosed below - note that this list isn't thorough. Given the prevalence of bound of those indicators, we tend to encourage management to undertake impairment testing as applicable. External indicators • noticeable indicators of decrease in value; • important changes with associate adverse result on the entity have taken place throughout the {amount} within the economic surroundings that|during which|within which} the entity operates or within the market to which associate quality is dedicated; • The carrying amount of cyber web assets of the entity is quite its capitalisation. Internal indicators • Assets changing into idle; • proof that economic performance is worse than expected; • Plans to get rid of associate asset; • Plans to structure. thanks to the temporary interruption of operations and potential current uncertainty, an instantaneous decline in demand and reduction of gain is expected. These declines should be enclosed as key assumptions in ViU forecasts with clear, reasonable, and auditable assumptions enclosed within the model. it's not affordable, within the current surroundings, for many entities to forecast growth from the comparative amount. it's conjointly possible, given the recent volatility of capital markets, that: • Beta for the entity might increase (as a results of raised risk associated with forecasts given raised uncertainty);and • The indicated value of equity might increase; leading to will increase within the weighted worth|price|cost} of capital and reduces within the internet gift value of future money flows. Impairment is therefore possible to be expected in several instances. wherever impairment results upon the appliance of the ViU model, the honest price less prices of Disposal model should be thought of. Reference ought to be created to closed and completed transactions, whereas minimising reliance upon hearth sales of qualitys or asset teams which will have occurred. within the current surroundings, it's going to be troublesome to see a current honest price within the absence of arms-length transactions between willing parties. As a reminder, the entities employing a single expected outcome approach ought to build changes to include the chance related to COVID-19. The associated risks may well be either mirrored within the money flows or the discount rate whereas making certain the semipermanent growth assumptions ar applicable. in spite of that approach is employed (multiple probable outcome or single expected outcome), management should make sure the outcome reflects the expected gift price of future money flows. Impairment of long assets Individual long assets ought to be assessed for impairment wherever indicators of impairment ar known. sure as shooting assets, this could be best achieved by respect to the money Generating Unit that the quality operates inside. For others, notably wherever associate noticeable honest price less prices of Disposal exists, it's going to be applicable to check for impairment at the quality level, however an absence of freelance money inflows having the ability to be generated by the quality (AASB 136.22). categories of long assets possible to be compact include: • Right-of-use lease assets; • Property, plant and equipment; • Intangible assets. Other assets doubtless subject to impairment Entities might have assets that ar subject to impairment testing that don't qualify as long assets and don't seem to be monetary assets. These assets ought to be assessed for impairment, notably wherever these amounts replicate historic transactions with third parties wherever the trustworthiness of those third parties is currently known as into question. Examples include: Security deposits control by third parties what's the trustworthiness of the counterparty - is that the deposit recoverable? Prepayments will the counterparty retain its ability to supply the paid services? E.g. paid package maintenance.

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