Corporate Accounting Aasb3 136 Impairment of Assets
Part A (6 Marks)
AASB 3 Business combinations para.14 requires that the acquisition method be used to account for business combinations. This method requires the identification of the acquirer. For example, para.17 states that “an acquirer shall be identified for all business combinations”.
• Provide and explain a list of factors that may assist management to identify the acquiring entity.
• Explain why it is necessary to identify who is the acquirer in a business combination? (Adapted from Leo et al. Case 2, p.395).
Part B (19 Marks)
Sahara Ltd recently adopted the international accounting standards. The management of Sahara Ltd are seeking your advice regarding impairment testing under AASB 136 Impairment of Assets.
Required:
Write a report to the management addressing the following issues:
• Explain why impairment testing is carried out.
• Explain how often the test needs to carried out
• Explain what steps are to be followed in applying the impairment test
• Explain the characteristics of goodwill, and how existence of goodwill affects the impairment test
• Explain how the International Financial Reporting Standard IAS36 applies to this case.
(Adapted from Leo et al. Case 2, p.450).
Part A AASB 3 Business combinations para.14 requires that the acquisition method be used to account for business combinations. This method requires the identification of the acquirer. For example, para.17 states that “an acquirer shall be identified for all business combinations”. Q.1) Provide and explain a list of factors that may assist management to identify the acquiring entity. WHO IS THE ACQUIRER: (AASB 3 "Business Combinations", 2010) states that, the acquirer is the combining entity that obtains control of the other combining entities or businesses. Therefore, for all business combinations, there is need to identify the acquiring entity. LIST OF FACTORS TO IDENTIFY THE ACQUIRING ENTITY: In a business
AASB 3 Business combinations para.14 requires that the acquisition method be used to account for business combinations. This method requires the identification of the acquirer. For example, para.17 states that “an acquirer shall be identified for all business combinations”.
• Provide and explain a list of factors that may assist management to identify the acquiring entity.
• Explain why it is necessary to identify who is the acquirer in a business combination? (Adapted from Leo et al. Case 2, p.395).
Part B (19 Marks)
Sahara Ltd recently adopted the international accounting standards. The management of Sahara Ltd are seeking your advice regarding impairment testing under AASB 136 Impairment of Assets.
Required:
Write a report to the management addressing the following issues:
• Explain why impairment testing is carried out.
• Explain how often the test needs to carried out
• Explain what steps are to be followed in applying the impairment test
• Explain the characteristics of goodwill, and how existence of goodwill affects the impairment test
• Explain how the International Financial Reporting Standard IAS36 applies to this case.
(Adapted from Leo et al. Case 2, p.450).
Part A AASB 3 Business combinations para.14 requires that the acquisition method be used to account for business combinations. This method requires the identification of the acquirer. For example, para.17 states that “an acquirer shall be identified for all business combinations”. Q.1) Provide and explain a list of factors that may assist management to identify the acquiring entity. WHO IS THE ACQUIRER: (AASB 3 "Business Combinations", 2010) states that, the acquirer is the combining entity that obtains control of the other combining entities or businesses. Therefore, for all business combinations, there is need to identify the acquiring entity. LIST OF FACTORS TO IDENTIFY THE ACQUIRING ENTITY: In a business
Bibliography: * AASB 136, "Impairment of Assets". (n.d.). Retrieved April 23, 2012, from AASB "Australian Accounting Standards Board": http://www.aasb.gov.au/admin/file/content105/c9/AASB136_07-04_COMPjun09_01-10.pdf * AASB 3 "Business Combinations". (2010, July 29). Retrieved April 15, 2012, from AASB: http://www.aasb.gov.au/admin/file/content102/c3/AASB3_03-08_ERDRjun10_07-09.pdf * Ernst & Young. (2008). International GAAP 2008. UK: John Wiley & Sons, Ltd. * Impairment of Assets. (2009, June 30). Retrieved May 3, 2012, from ACT Accounting Policy: http://www.treasury.act.gov.au/accounting/download/AP_09.pdf * parker, M. (2010). Accounting- A Brief Introduction to Goodwill. Retrieved May 5, 2012, from Ezine Articles: http://ezinearticles.com/?Accounting---A-Brief-Introduction-to-Goodwill&id=4995005 * PWC. (2010). Understanding the accounting for impairment of Assets. Retrieved April 20, 2012, from PWC: http://www.pwc.com.au/assurance/ifrs/assets/back-to-basics/Back-to-Basics-Accounting-impairment-assets-Jan12.pdf * R.Dagwell, G. Wines, C. Lambert & J.Psaros. (2011). Corporate Accounting in Australia . Pearson Education Australia. * Rorke, J. (2007, September). AIFRS. Retrieved April 22, 2012, from JR Corporate News: http://www.jr.com.au/assets/file/publications/jr-corporate-newsletters/JR_CorporateNews_Sep07.pdf * Understanding the accounting for goodwill in a business combination. (2010). Retrieved May 3, 2012, from PWC: http://www.pwc.com.au/assurance/ifrs/assets/back-to-basics/Back-to-Basics-Understanding-Accounting-Goodwill-Nov11.pdf