Advance financial accounting Report

Document Type:Thesis

Subject Area:Accounting

Document 1

According to the company, the impairments brought about a liability of 18,194 dollars which is viewed by the company as an expense incurred by the company. Impairment does affect more that one factor of the financial statement, this includes the receivables, fixed assets, current assets, goodwill, and the company loses. In general, the impairment of the group brought about a big gap to the expected and realized income of the minerals company. According to the company 2014 annual report, the asset tested for impairment were current receivables good will and fixed assets. The combined impaired value of the minerals company is $18,193. On the other hand, the noncurrent asset receivables are also calculated to determine the impaired value of the fixed assets. For example the loans receivables and security deposits.

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The minerals company did experience or suffered impairment expenditure; this includes the losses due to inflation on receivables expenditure. The company had debtors which amounted to $8,971, but the current real value had increased by 1% in this case, the total amount of debtors did amount to $ 1108, the company suffered by paying an expense of $137. According to accounting, any expenses to the company is considered a liability or a loss in expenditure to the company. The items on the balance sheet affected by impairment have different methods of estimation as well as their distinct assumptions. Goodwill The impairment of goodwill has to be calculated every year since the good will is a more fluid asset. Therefore, the impairment of goodwill has to be calculated every single year to ascertain the gap brought about by the impaired goodwill.

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In the near past impairments on goodwill were not reversed according to the future year value, the reason for this act was because, on some occasion, goodwill does not impair with time. Other assets which are part of the balance sheet are also tested in an event where there is a change in the economic situation that could have brought about the impairment of that particular asset. Insights on financial impairment The main reason for calculating impairment is to analyze the value that item to verify if it is becoming a liability to the company. In some cases, the assets become too expensive for the company to main. Which would mean that the output is decreasing and not able to cover other overhead costs? The body governing the impairment of assets IAS 36, seek to make sure that an agency or a company has to do more than their amounts receivables.

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For instance, the body tends to equalize the value less cost and of disposal or the selling price. As stated above, goodwill is a more liquid asset, and its impairment has to be tested each year. Since the balance sheet is essential for the creation of the final financial statements, the final value will not entirely reflect the worth of the company. Furthermore, in a situation where the company is dissolved indefinitely, a problem might occur during the dissolution since the financial statements are used to pay the debts as well as the shareholders. In continuation, in case an investor wants to invest in the company, the information he/ she receives does not truly reflect the economic reality. The process of formulating the balance sheet without including the lease transactions bring about understatement.

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As a result, a company possessing millions in the operating leases could appear bankrupt an this could scare away the investors. Adverse effects will meet changes on this laws; this includes the default on debtors covenant as well as the high cost of system changes and adjustment. Management is a very challenging post, a variety of functions and parameters has to be considered before making a lease or purchasing a product or an asset to the company. The chairperson of IASB indicated that the new lease laws would bring about equivalence in the rental and buy twist. The decision for the management will be more comfortable because the real value of leased and bought equipment Will be reflecting on the balance.

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