Page 3 of 4 FirstFirst 1234 LastLast
Results 21 to 30 of 37

Thread: 28 Accounting Standard 28 Impairment of Assets - AS 28

  1. #21
    Accounting Standards
    Guest

    Default Impairment in case of Discontinuing Operations of Accounting Standard (AS) 28 Impairment of Assets

    Impairment in case of Discontinuing Operations of Accounting Standard (AS) 28 Impairment of Assets



    112. The approval and announcement of a plan for discontinuance1 2 is an indication that the assets attributable to the discontinuing operation may be impaired or that an impairment loss previously recognised for those assets should be increased or reversed. Therefore, in accordance with this Statement, an enterprise estimates the recoverable amount of each asset of the discontinuing operation and recognises an impairment loss or reversal of a prior impairment loss, if any.


    113. In applying this Statement to a discontinuing operation, an enterprise determines whether the recoverable amount of an asset of a discontinuing operation is assessed for the individual assetor for the assets cash-generating unit. For example:

    (a) if the enterprise sells the discontinuing operation substantially in its entirety, none of the assets of the discontinuing operation generate cash inflows independently fromother assets within the
    discontinuing operation. Therefore, recoverable amount is determined for the discontinuing operation as a whole and an impairment loss, if any, is allocated among the assets of the discontinuing operation in accordance with this Statement;

    (b) if the enterprise disposes of the discontinuing operation in other ways such as piecemeal sales, the recoverable amount is determined for individual assets, unless the assets are sold in groups; and

    (c) if the enterprise abandons the discontinuing operation, the recoverable amount is determined for individual assets as set out in this Statement.

    114. After announcement of a plan, negotiations with potential purchasers of the discontinuing operation or actualbindingsale agreements may indicate that the assets of the discontinuing operation may be further impaired or that impairment losses recognised for these assets in prior periods may have decreased. As a consequence, when such events occur, an enterprise re- estimates the recoverable amount of the assets of the discontinuing operation and recognises resulting impairment losses or reversals of impairment losses in accordance with this Statement.

    115. A price in a binding sale agreement is the best evidence of an assets (cash-generating units) net selling price or of the estimated cash inflow from ultimate disposal in determining the assets (cash-generating units) value in use.

    116. The carryingamount (recoverable amount) of a discontinuingoperation includes the carrying amount (recoverable amount) of any goodwill that can be allocated on a reasonable and consistent basis to that discontinuing operation.
    Last edited by Accounting Standards; 11-08-2010 at 12:43 PM.

  2. #22
    Accounting Standards
    Guest

    Default Disclosure of Accounting Standard (AS) 28 Impairment of Assets

    Disclosure of Accounting Standard (AS) 28 Impairment of Assets

    117. For each class of assets, the financial statements should disclose:

    (a) the amount of impairment losses recognised in the statement of profit and loss during the period and the line item(s) of the statement of profit and loss in which those impairment losses are included;

    (b) the amount of reversals of impairment losses recognised in the statement of profit and loss during the period and the line item(s) of the statement of profit and loss in which those impairment losses are reversed;

    (c) the amount of impairment losses recognised directly against revaluation surplus during the period; and

    (d) the amount of reversals of impairment losses recognised directly in revaluation surplus during the period.



    118. A class of assets is a grouping of assets of similar nature and use in an enterprise
    s operations.


    119. The information required in paragraph 117 may be presented with other information disclosed for the class of assets. For example, this information may be included in a reconciliation of the carrying amount of fixed assets, at the beginning and end of the period, as required underAS 10,



    Accounting for Fixed Assets.



    120. An enterprise that applies AS 17, Segment Reporting, should disclose the following for each reportable segment based on an enterprise


    s primary format (as defined in AS 17):


    (a) the amount of impairment losses recognised in the statement of profit and loss and directly against revaluation surplus during the period; and



    (b) the amount of reversals of impairment losses recognised in the statement of profit and loss and directly in revaluation surplus during the period.




    121. If an impairment loss for an individual asset or a cash-generating unit is recognised or reversed during the period and is material to the financial statements of the reporting enterprise as a whole, an enterprise
    should disclose:



    (a) the events and circumstances that led to the recognition or reversal of the impairment loss;



    (b) the amount of the impairment loss recognised or reversed;



    (c) for an individual asset:



    (i) the nature of the asset; and
    (ii) the reportable segment to which the asset belongs, based on the enterprise


    s primary format (as defined in AS

    17, Segment Reporting);



    (d) for a cash-generating unit:



    (i) a description of the cash-generating unit (such as whether it is a product line, a plant, a business operation,
    a geographical area, a reportable segment as defined in AS 17 or other);



    (ii) the amount of the impairment loss recognised or reversed by class of assets and by reportable segment based on
    the enterprises primary format (as defined in AS 17); and



    (iii) if the aggregation of assets for identifying the cashgenerating unit has changed since the previous estimate
    of the cash-generating units recoverable amount (if any), the enterprise should describe the current and former way
    of aggregating assets and the reasons for changing the way the cash-generating unit is identified;



    (e) whether the recoverable amount of the asset (cash-generating unit) is its net selling price or its value in use;



    (f) if recoverable amount is net selling price, the basis used to determine net selling price (such as whether selling price was determined by reference to an active market or in some other way); and



    (g) if recoverable amount is value in use, the discount rate(s) used in the current estimate and previous estimate (if any) of value in use.




    122. If impairment losses recognised (reversed) during the period are material in aggregate to the financial statements of the reporting enterprise as a whole, an enterprise should disclose a brief description
    of the following:



    (a) the main classes of assets affected by impairment losses (reversals of impairment losses) for which no information is disclosed under paragraph 121; and



    (b) the main events and circumstances that led to the recognition (reversal) of these impairment losses for which no information is disclosed under paragraph 121.




    123. An enterprise is encouraged to disclose key assumptions used to determine the recoverable amount of assets (cash-generating units) during the period.

    Last edited by Accounting Standards; 11-08-2010 at 12:43 PM.

  3. #23
    Accounting Standards
    Guest

    Default Transitional Provisions of Accounting Standard (AS) 28 Impairment of Assets

    Transitional Provisions of Accounting Standard (AS) 28 Impairment of Assets


    124. On the date of this Statement becoming mandatory, an enterprise should assess whether there is any indication that an asset may be impaired (see paragraphs 5-13). If any such indication exists, the enterprise should determine impairment loss, if any, in accordance with this Statement. The impairment loss, so determined, should be adjusted against opening balance of revenue reserves being the accumulated impairment loss relating to periods prior to this Statement becoming mandatory unless the impairment loss is on a revalued asset. An impairment loss on a revalued asset should be recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset. If the impairment loss exceeds the amount held in the revaluation surplus for that same asset, the excess should be adjusted against opening balance of revenue reserves.


    125. Any impairment loss arising after the date of this Statement becoming mandatory should be recognised in accordance with this Statement (i.e., in the statement of profit and loss unless an asset is carried at revalued amount. An impairment loss on a revalued asset should be treated as a revaluation decrease).
    Last edited by Accounting Standards; 11-08-2010 at 12:44 PM.

  4. #24
    Accounting Standards
    Guest

    Default Appendix of Illustrative Examples of Accounting Standard (AS) 28 Impairment of Assets

    Appendix of Illustrative Examples of Accounting Standard (AS) 28 Impairment of Assets


    The appendix is illustrative only and does not form part of the Accounting Standard. The purpose of the appendix is to illustrate the application of the Accounting Standard to assist in clarifying its meaning. All the examples in this appendix assume the enterprises concerned have no transactions other than those described.
    Last edited by Accounting Standards; 11-08-2010 at 12:44 PM.

  5. #25
    Accounting Standards
    Guest

    Default Example 1 Identification of Cash-Generating Units of Accounting Standard (AS) 28 Impairment of Assets

    Example 1 - Identification of Cash-Generating Units


    The purpose of this example is:

    (a) to give an indication of how cash-generating units are identified in various situations; and

    (b) to highlight certain factors that an enterprise may consider in identifying the cash-generating unit to which an asset belongs.
    Last edited by Accounting Standards; 11-08-2010 at 12:45 PM.

  6. #26
    Accounting Standards
    Guest

    Default Retail Store Chain Background of Accounting Standard (AS) 28 Impairment of Assets

    A - Retail Store Chain Background of Accounting Standard (AS) 28 Impairment of Assets


    Al. Store X belongs to a retail store chainM. Xmakes all its retail purchases through Ms purchasing centre. Pricing, marketing, advertising and human resources policies (except for hiring Xs cashiers and salesmen) are decided byM.Malso owns 5 other stores in the same city as X (although in different neighbourhoods) and 20 other stores in other cities. All stores are managed in the same way as X. X and 4 other stores were purchased 4 years ago and goodwill was recognised.


    What is the cash-generating unit for X (Xs cash-generating unit)? Analysis

    A2. In identifyingXs cash-generating unit, an enterprise considerswhether, for example:
    Last edited by Accounting Standards; 11-08-2010 at 12:50 PM.

  7. #27
    Accounting Standards
    Guest

    Default B - Plant for an Intermediate Step in a Production Process Background of Accounting Standard (AS) 28 Impairment of Assets

    B - Plant for an Intermediate Step in a Production Process Background of Accounting Standard (AS) 28 Impairment of Assets


    A5. A significant raw material used for plant Ys final production is an intermediate product bought fromplantXof the same enterprise.Xs products are sold to Y at a transfer price that passes all margins to X. 80% of Ys final production is sold to customers outside of the reporting enterprise. 60% ofXs final production is sold toYand the remaining 40%is sold to customers outside of the reporting enterprise.


    For each of the following cases, what are the cash-generating units for X and Y?

    Case 1: X could sell the products it sells to Y in an active market. Internal transfer prices are higher than market prices.

    Case 2: There is no active market for the products X sells to Y.

    Analysis

    Case 1

    A6. X could sell its products on an active market and, so, generate cash inflows from continuing use that would be largely independent of the cash inflows from Y. Therefore, it is likely that X is a separate cash-generating unit, although part of its production is used by Y (see paragraph 68 of this
    Statement).

    A7. It is likely that Y is also a separate cash-generating unit. Y sells 80% of its products to customers outside of the reporting enterprise. Therefore, its cash inflows from continuing use can be considered to be largely independent.

    A8. Internal transfer prices do not reflect market prices for Xs output. Therefore, in determining value in use of bothXandY, the enterprise adjusts financial budgets/forecasts to reflect managements best estimate of future market prices for those ofXs products that are used internally (see paragraph 68 of this Statement).

    Case 2

    A9. It is likely that the recoverable amount of each plant cannot be assessed independently from the recoverable amount of the other plant because:

    (a) themajority ofXs production is used internally and could not be sold in an activemarket. So, cash inflows ofXdepend on demand for Ys products. Therefore, X cannot be considered to generate cash inflows that are largely independent from those of Y; and

    (b) the two plants are managed together.


    A10. As a consequence, it is likely that X and Y together is the smallest group of assets that generates cash inflows from continuing use that are largely independent.

  8. #28
    Accounting Standards
    Guest

    Default C - Single Product Enterprise Background of Accounting Standard (AS) 28 Impairment of Assets

    C - Single Product Enterprise Background of Accounting Standard (AS) 28 Impairment of Assets


    A11. Enterprise M produces a single product and owns plants A, B and C. Each plant is located in a different continent. A produces a component that is assembled in either B or C. The combined capacity of B and C is not fully utilised.Ms products are sold world-wide from either B or C. For example, Bs production can be sold in Cs continent if the products can be delivered faster from B than from C. Utilisation levels of B and C depend on the allocation of sales between the two sites.
    For each of the following cases, what are the cash-generating units for A, B and C?


    Case 1: There is an active market for As products.

    Case 2: There is no active market for As products.

    Analysis


    Case 1

    A12. It is likely that A is a separate cash-generating unit because there is an active market for its products (see Example B-Plant for an Intermediate Step in a Production Process, Case 1).
    A13. Although there is an active market for the products assembled by B and C, cash inflows for B and C depend on the allocation of production across the two sites. It is unlikely that the future cash inflows for B and C can be determined individually. Therefore, it is likely thatBand Ctogether is
    the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent.

    A14. In determining the value in use ofAand B plusC,Madjusts financial budgets/forecasts to reflect its best estimate of future market prices for As products (see paragraph 68 of this Statement).

    Case 2

    A15. It is likely that the recoverable amount of each plant cannot be assessed independently because:

    (a) there is no active market for As products. Therefore, As cash inflows depend on sales of the final product by B and C; and

    (b) although there is an active market for the products assembled by B and C, cash inflows for B and C depend on the allocation of production across the two sites. It is unlikely that the future cash
    inflows for B and C can be determined individually.

    A16. As a consequence, it is likely that A, B and C together (i.e., M as a whole) is the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent.

  9. #29
    Accounting Standards
    Guest

    Default D -Magazine Titles of Accounting Standard (AS) 28 Impairment of Assets

    D -Magazine Titles of Accounting Standard (AS) 28 Impairment of Assets

    Background

    A17. A publisher owns 150 magazine titles of which 70 were purchased and 80 were self-created. The price paid for a purchased magazine title is recognised as an intangible asset. The costs of creating magazine titles and maintaining the existing titles are recognised as an expense when incurred. Cash inflows from direct sales and advertising are identifiable for each magazine title. Titles are managed by customer segments. The level of advertising income for a magazine title depends on the range of titles in the customer segment to which the magazine title relates. Management has a
    policy to abandon old titles before the end of their economic lives and replace them immediately with new titles for the same customer segment. What is the cash-generating unit for an individual magazine title?

    Analysis

    A18. It is likely that the recoverable amount of an individualmagazine title can be assessed. Even though the level of advertising income for a title is influenced, to a certain extent, by the other titles in the customer segment, cash inflows from direct sales and advertising are identifiable for each title. In addition, although titles are managed by customer segments, decisions to
    abandon titles are made on an individual title basis.

    A19. Therefore, it is likely that individual magazine titles generate cash inflows that are largely independentone fromanother and that eachmagazine title is a separate cash-generating unit.

  10. #30
    Accounting Standards
    Guest

    Default E - Building Half-Rented to Others and Half-Occupied for Own Use of Accounting Standard (AS) 28 Impairment of Assets

    Building Half-Rented to Others and Half-Occupied for Own Use of Accounting Standard (AS) 28 Impairment of Assets


    Background

    A20. M is a manufacturing company. It owns a headquarter building that used to be fully occupied for internal use. After down-sizing, half of the building is now used internally and half rented to third parties. The lease agreement with the tenant is for five years.

    What is the cash-generating unit of the building?

    Analysis

    A21. The primary purpose of the building is to serve as a corporate asset, supportingMs manufacturing activities. Therefore, the building as a whole cannot be considered to generate cash inflows that are largely independent of the cash inflows from the enterprise as a whole. So, it is likely that the cash-generating unit for the building is M as a whole.

    A22. The building is not held as an investment. Therefore, it would not be appropriate to determine the value in use of the building based on projections of future market related rents.

Tags for this Thread

Bookmarks

Posting Permissions

  • Register / Login to post new threads
  • Register / Login to post replies
  • Register / Login to post attachments
  • You may not edit your posts
  •