IAS 36 How Impairment test

IAS 36 How Impairment test is all about this – When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps: IAS 36 How Impairment test

  • What?? – Determining the scope and structure of the impairment review, explained here,
  • If and when? – Determining if and when a quantitative impairment test is necessary, explained here,
  • IAS 36 How Impairment test or understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary. Which is explained in this section…

The objective of IAS 36 Impairment of assets is to outline the procedures that an entity applies to ensure that its assets’ carrying values are not … Read more

Valuation techniques Income approach

Valuation techniques Income approach converts future amounts (cash flows or income and expenses) to a single current (i.e. discounted) exit price amount.

Expected cash flow

IFRS 13 Definition of expected cash flow: The probability-weighted average (ie mean of the distribution) calculation of possible future cash flows in a case.

Discount rate

Discount rate used in discounted cash flow models incorporates the time value of money (the risk-free rate) and a risk premium build from distinct components

Calculating the value of an acquisition

Calculating the value of an acquisition – This is a detailed example of calculating the fair value of an acquisition, using a logical step by step approach and realistic assumptions and determinations based on transaction and market data. Identifying and valuing intangible asset(s) is a broad endeavor and requires careful consideration of; factors specific to each business, the transaction structure, identifying the primary income generating asset, determining the discount rates, estimating the useful lives for identified intangibles. Examples of such intangibles include customer contracts, trademarks, brands, etc.


The Deal Fortune, Inc. acquired M&P Company on January 1, 2017. Consideration was $30 million cash plus additional contingent consideration, as follows:


  • Below 1 million: Nil Calculating the value of an
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Cash Flow Risk Management

Cash Flow Risk Management The risk that companies must identify and manage is their cash flow risk, meaning uncertainty about their future cash flows. Finance theory is, for the most part, silent about how much cash flow risk a company should take on. Company Cash Flow Risk Management

In practice, however, managers need to be aware that calculating expected cash flows can obscure material risks capable of jeopardizing their business when they are deciding how much cash flow risk to accept. They also need to manage any risks affecting cash flows that investors are unable to mitigate for themselves. Company Cash Flow Risk Management

Deciding how much cash flow risk to take on what should companies look out for? Consider … Read more

Deferred tax assets Future tax profits

The availability of future taxable profits – a problem in four parts Deferred tax assets Future tax profits

The best starting point for determining the availability of future taxable profits is a company’s own business planning cycle and resulting forecasts. Using the company’s forecasts to assess the value of assets with potentially significant impact is not a unique exercise for most telecom operators. Given the significant balances of goodwill, other intangible and tangible assets, impairment testing is an important element of their financial reporting process. Deferred tax assets Future tax profits

Impairment tests generally are based on approved budgets, which result from a robust budgeting process, and often external experts are involved throughout the impairment process. Often, the analyses used Read more