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IAS 36 What is a lease impairment?

A right-of-use asset will frequently be included in a cash generating unit to be tested for impairment. At initial recognition, the right-of-use-asset equals the recognised lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received, plus any initial direct costs incurred by the lessee and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset and restoring the site on which the leased asset is located. The most significant part of the right-of-use asset will often be the lease liability, which is the present value of the lease payments discounted at the interest rate implicit in the lease if this rate is … Read more

Impairment testing cash generating unit with leases

A right-of-use asset will frequently be included in a cash generating unit to be tested for impairment. At initial recognition, the right-of-use-asset equals the recognised lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received, plus any initial direct costs incurred by the lessee and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset and restoring the site on which the leased asset is located. The most significant part of the right-of-use asset will often be the lease liability, which is the present value of the lease payments discounted at the interest rate implicit in the lease if this rate is … Read more

Valuation of shares and the enterprise

The Discounted cash flow calculation method is an income-based approach to valuation that is based upon the theory that the value of a business is equal to the present value of its projected future benefits (including the present value of its terminal value). The terminal value does not assume the actual termination or liquidation of the business, but rather represents the point in time when the projected cash flows level off or flatten (which is assumed to continue into perpetuity). The amounts for the projected cash flows and the terminal value are discounted to the valuation date using an appropriate discount rate, which encompasses the risks specific to investing in the specific company being valued. Inherent in this method … Read more

Adjusted net asset method negative goodwill example

The asset accumulation method and the adjusted net asset method are both generally accepted business valuation methods of the asset-based business valuation approach. This is an example resulting in the recognition of negative goodwill. Other examples are intangible assets and tangible asset.

The valuation expert is again retained to estimate the value of 100 percent of the ownersequity of a company as of December 31, 2016. In this example, the company is called Blue Client Company (“Blue”).

Again, the assignment calls for a fair market value standard of value and a marketable, controlling ownership interest level of value.

The Blue December 31, 2016, historical cost basis balance sheet is again the same as the Red December 31, … Read more

Adjusted net asset method tangible asset example

The asset accumulation method and the adjusted net asset method are both generally accepted business valuation methods of the asset-based business valuation approach. This is an example resulting in the recognition of a revaluation to fair value of a tangible asset. Other examples are intangible assets and negative goodwill.

The valuation expert is again retained to estimate the value of 100 percent of the owners equity of the subject company, White Client Company (“White”), as of December 31, 2016.

Again, the valuation assignment calls for a fair market value standard of value and a marketable, controlling ownership interest level of value. White has the same GAAP-based balance sheet as did the hypothetical Red Client Company. Again, all … Read more

Adjusted net asset method intangible assets example

The asset accumulation method and the adjusted net asset method are both generally accepted business valuation methods of the asset-based business valuation approach. This is an example showing the recognition of an intangible asset. Other examples are tangible assets and negative goodwill.

An valuation expert is retained to estimate the value of 100 percent of the ownersequity of Red Client Company (“Red”), as of December 31, 2016. The assignment is to conclude fair market value of the Red equity on a marketable, controlling ownership interest basis.

Let’s assume that the valuation expert decides to apply the asset-based business valuation approach and the adjusted net asset value method. The valuation expert is going to revalue the … Read more