Timing Of Impairment And The Accounting Standards Of The International Accounting Standards

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Under the possible accounting standards and framework, Impairment testing is required. The provisions for carrying out impairment tests have been concluded by the International Accounting Standards Board basically in International Accounting Standard (IAS) 36 Impairment of Assets.
The fundamental intention of the impairment test is to take the carrying value of a company in accordance with its recoverable value, which is the higher of the fair value taking away the value in use and cost to sell. In more practical parts, this means that the company’s book value have to not over the receiving value, which expect by the company’s owners, no matter thought its open market sale or from its continuous use.

1.2 Timing of the Impairment test

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Then, if the assets installing the cash- generating unit to which goodwill has been assigned have impairment testing in the mean time as the unit including the goodwill, it will be had the impairment testing before the unit including the goodwill. In addition, in the period of the test of impairment, a cash- generating unit to which goodwill has been assigned; there could be a sign of an impairment of an asset within the unit including the goodwill (AASB,…show more content…
When there is an impairment loss, there are not restated of past income statements. And then, an impairment loss will be involved in the current income statement which is in income before tax from continuing operations. Net income will also be lower as well. In addition, long-term assets are decreased by the impairment. Also, stockholders ' equity goes down.

3.3 The effect of the impairment on the financial performance of a company

For a company, when there is the impairment, there will be more risk and the company will have more possibility that they can not resist such risk. Cash flow based ratios will remain unaffected as well. It will be the same higher future net income as the lower asset value and a smaller depreciation expense. Future ROE and ROA will rise. In addition, evaluated fixed assets and depreciation policy of past ratios are distorted by impairment write-downs.

3.4 The performance of NCM Ltd to have a 15% debt
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