Examples Of Management Judgement And Judgements

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Management Judgement and Estimates: I will be looking at revenue in advance, estimated impairments of non-financial assets and depreciation to see the extent of application of management judgment and estimates. Revenue in advance is seen on the statement of financial position under current and non-current liabilities and includes transportation sales in advance and loyalty programmes (Air New Zealand, 2014). Air (2014) states that revenue from unused tickets is recognised using estimates about timing of recognition based on the terms and conditions and historical trends. The fair value of revenues associated with Air 's loyalty programme is postponed until the member has redeemed their airpoints. NZ IAS 18 (2006c) states that revenue is to…show more content…
I will be looking at fair value accounting and depreciation. Fair value is the market value at which an asset can be sold or bought. Ryan (2008) highlights many criticisms regarding fair value accounting, these include the reported losses being misleading because when markets return to normal the losses will reverse. When a company revaluates assets or liabilities at a time when the market condition is bad, the value of the assets and liabilities begin to 'swing '. However, once the market stabilises, assets and liabilities will be revalued at their original levels. This makes reports of gains and losses temporary which can be misleading to potential investors (Penman, 2007). Fair values being unreliable as they are difficult to estimate especially if the market is illiquid. And reported losses producing further losses which increases the overall risk of the financial system. For example, if the current market price for an asset drops and thus revaluing the asset downward, people might begin buying this asset at even more lower prices (Benston,

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