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

IAS 36 Best brilliant impairment of telecom assets

IAS 36 Best brilliant impairment of telecom assets sets out the procedures that an entity should follow to ensure that it carries its assets at no more than th IAS 36 Best brilliant impairment of telecom assets eir recoverable amount. Recoverable amount is the higher of the amount to be realised through using or selling the asset.

Where the carrying amount exceeds the recoverable amount, the asset is impaired and an impairment loss must be recognised.

The standard details the circumstances when an impairment loss should be reversed, and also sets out required disclosures for impaired assets, impairment losses, reversals of impairment losses as well as key estimates and assumptions used in measuring the recoverable amounts of cash-generating units (CGUs) that contain goodwill or intangible assets with indefinite … 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

Inventories the highlights

Inventories the highlights as it says provides a high level summary of the accounting and financial reporting in respect of inventory.

See Inventories for IFRS for Small and Medium-sized entities, the complete IAS 2 Inventories standards is also available.

Inventory is also called stock in trade, or just stock. Inventories the highlights

Scope

Applies to all inventories except:

  • work in progress on construction and service contracts (IAS 11);
  • financial instruments (IAS 32 and IFRS 9); and
  • biological assets arising from agricultural activity (IAS 41).

Does not apply to the measurement of inventories held by:

  • producers of agricultural and forest products, and minerals and mineral products, that are measured at net realisable value in accordance with well-established practices in those industries;
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Fair Value of Tangible Assets

Fair Value of Tangible Assets – In the event of Business Combinations tangible assets (current – non-current) are best valued with the market or income approaches. If adequate data are not available to derive an indication of value through these methods, an appraiser may use the replacement cost method, which adjusts the original cost for changes in the price level to determine its current replacement cost. The current replacement cost is then adjusted due to physical use or functional obsolescence. Cash-generating unit (CGU) Cash-generating unit (CGU)

Property, Plant and Equipment (PP&E) must be recognized at fair value for current capacity. Accumulated depreciation is not carried forward. An appraiser may use the cost approach, in which a market participant would pay no more for an asset … Read more

Intangible valuation approach

Intangible valuation approach Intangible valuation approach – Valuation assignments must estimate the value of intangibles, recognising the volatility, ongoing creation and problems with protection and enforcement. Business valuation analysts have been independently valuing intangible assets for many years, usually in the context of an exchange between owners (transaction), for estate and gift tax purposes or as part of a litigation assignment. Knowledge underlies the creation of value. Some of the questions that need to be answered include the following:

  • What would a willing buyer pay to employ the intangible asset?
  • What is the useful life of this asset?
  • What portion of the operating income does this asset generate?

Financial reporting concepts require measurement of these separable intangible assets from the overall goodwill in Read more

Asset accumulation valuation example

Asset accumulation valuation 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. Here is an example of the asset accumulation method:

A valuation expert has been retained to estimate the fair market value of the total equity of Brown Client Company (“Brown”) as of December 31, 2016. Let’s assume that Brown is a family-owned construction contractor company. Asset accumulation valuation example

The valuation expert decided to use the asset-based valuation approach and the asset accumulation valuation method. sset accumulation valuation example

The Brown GAAP-basis balance sheet for December 31, 2016, is presented on Exhibit 1. All financial data are presented in … Read more

Valuation of Intangibles on Acquisition

In Valuation of Intangibles on Acquisition a lot of practical examples are shown to be used as a tool of reference when challenging a valuation in real life.

THE CASE: Shockwave Corporation

  • Shockwave Corporation is the largest satellite radio provider in the country. Shockwave commenced operations five years ago when the government granted satellite spectrum licenses to four start-ups seeking to cultivate a then-burgeoning industry. Since that time, precipitated by the accelerating wireless data needs of telecommunication industry technology, the government has stated that it will not be licensing any new spectrum for satellite radio but may approve the sale or transfer of existing spectrum.
  • Shockwave generates its revenue from monthly subscriptions to consumers sourced via a direct retail sales
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