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

Leveraged buyout IFRS 3 best reporting

Leveraged buyout IFRS 3 best reporting – In corporate finance, a leveraged buyout (LBO) is a transaction where a company is acquired using debt as the main source of consideration. These transactions typically occur when a private equity (PE) firm borrows as much as they can from a variety of lenders (up to 70 or 80 percent of the purchase price) and funds the balance with their own equity. Leveraged buyout IFRS 3 best reporting

1 The process and business reason

The use of leverage (debt) enhances expected returns to the private equity firm. By putting in as little of their own money as possible, PE firms can achieve a large return on equity (ROE) and internal rate of return … Read more

3 powerful capital maintenance concepts

3 powerful capital maintenance concepts – There are three (or two a matter of definition) concepts of capital: a financial concept of capital (nominal maintenance and purchasing power maintenance) and a physical concept of capital. Under the financial concept, capital is defined as the net assets or equity of the enterprise, while under the physical concept, capital is defined as the productive capacity of the enterprise expressed in some physical units of measurement, as for example units of output per day.

The selection of the appropriate concept of capital by an enterprise should be based on the needs of the users of its financial statements. So, the financial concept of capital should be and mostly is used by the financial … Read more

General model of measurement of insurance contracts

The general model of measurement of insurance contracts in IFRS 17 is based on estimates of the fulfilment cash flows and contractual service margin.

IFRS 13 understand inputs to valuation techniques

Overview  IFRS 13 understand inputs to valuation techniques

  • Inputs to valuation techniques are the assumptions that market participants would use in pricing the asset or liability.
  • Inputs are categorized into three levels (fair value hierarchy):
    • Level 1 inputs—Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
    • Level 2 inputs—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
    • Level 3 inputs—Unobservable inputs for the asset or liability.
  • These inputs include assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value and the risk
Read more

Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Measurement basis

Measurement basis - An identified feature of an item being measured (for example, historical cost, fair value through profit or loss or OCI or fulfilment value).