Week 3 Lecture Notes

Week 3 Lecture Notes - td has machinery with t of $50,000...

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Value (CV) 2,000,000 Use (VIU) 1,400,000 u e (FV) 1,200,000 Value (CV) 1,400,000 mpairment 1,500,000 ue in Use (VIU) 1,700,000 e (FV) 1,200,000 Ltd has machinery with st of $50,000 depreciation of $25,000 g useful life in years 5 iation expense is $5,000 a lue carrying amount of the asset? 65,000. The equipment was originally purchased for $75,000 and now has a carrying value of $50,000. 45,000. The equipment was originally purchased for $75,000 and now has a carrying value of $50,000. s assets are not as efficient, or may be in need of replacement. s . A high rate suggest the entity is using its resources effectively and efficiently. ACCT Lecture 3 notes Non-Current Assets Impairments All PPE items must be tested for impairment in accordance with AASB136 test to ensure that the value reported in the balance sheet is not above the present value  expected future cash flows the business will generate from the use of the assets Impairment loss: amount by which the carrying amount of an asset (or a cash-generating unit) exceeds its recoverable amount CA > RA Recoverable amount (RA) is the higher of its fair value (FV) less costs to sell and its value in use (VIU) Value in use (VIU) is the present value of net cash flows expected to be derived from using the asset Cash generating unit is the smallest identifiable group of assets that generates cash inflows. So a business must first determine whether there are any indications that an asset may be impaired Second recoverable amount must be estimated Date Impairment Loss x xxx Accumulated Impairment loss- abc x xxx (to record impairment write-down on abc) 1) choose the higher value between FV and VIU (aka recoverable amount) 2) compare this to the carrying amount (CV) It is only when RA < CV that impairment loss must be recognised. Example 1- Impairments Example Accounting for impairment: 1) Selecting the higher of FV and VIU (=RA) 1,400,000 2) Calculate Impairment Loss (CV-RA) 2mil – 1.4mil 3) Record Journal Entry Date Impairment Loss 600,000 Accumulated Impairment Loss-abc 600,000 (to record impairment write-down on abc) 1
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Week 3 Lecture Notes - td has machinery with t of $50,000...

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