Discuss about the Corporate Accounting for Financial Assessment for Accounts.
The value regarding the non- financial assets is appropriately analyzed in the balance sheet in order to determine and evaluate there is any impairment present or not. Therefore, if there is impairment then it will help to estimate the recoverable amount of the asset. For intangible assets and goodwill, recoverable amount is calculated towards the end of the financial year. Therefore, asset’s regain able amount is greater than the fair value less sell costs. The assets help to increase flow of cash, for instance aircraft that are evaluated on the cash generating unit (Annual Report, 2016). The estimated flow of cash used to determine recoverable amount is discounted at the net present value using the discount rates that reflect an assessment of current market of time money value and risks specific to assets. The identification of CGU of the asset required judgment, and it requires determination of low aggregation of assets that helps to produce an independent flow of cash. The lowest asset’s aggregation gives augment to the CGUs as described by the AASB 136: mutilation of the assets are Qantas Domestic CGU, Qantas loyalty CGU, Qantas International CGU, Jetstar Group CGU and Qantas Freight CGU.
The value regarding the financial assets seems to be evaluated at the reporting date for the purpose of determining whether there is any impairment. The financial assets are considered to be impaired if the objective shows that the event has negative impact on the estimated flow of cash of those assets. The impairment losses in the financial asset is estimated at the amortized costs is estimated as difference between the present value and carrying amount of estimated future flow of cash discounted at an effective rate of interest of the asset.
Provisions for the Impairment of Financial Assets
The mutilation of the financial asset impairment arises, anywhere; the evidence is intention of the mutilation at a collective or individual basis, and an adequate amount to cover the credit related loss. The credit loss arises from the loans and also from the credit mechanisms such as guarantees, contingent liabilities, bank recognition and financial mechanisms. The provisions appraises are increased with presenting evidence objective of the mutilation. The provisions assessed are commonly made against the risk rate credit facility where there is a loss of amount $20,000. The provision is established primarily based on approximating the fair assessment of the guarantee taken and estimated as the dissimilarity between carrying amount of financial assets and present cost of the expected future flow of cash and discounted at original interest rate of the financial assets (Annual Report, 2016). The receivables and provision loan that do not have appraised provision individually are collectively appraised for the mutilation. The necessities are balanced in order to decrease carrying value of the portfolios of receivables and loans to the recoverable amounts at the balance sheet date. Therefore, the assessment process is subjected to the series of judgments and estimates. In the risk rating system, risk fragment including the default loss rates, default frequency, loss history and structure, diversity and size borrowers are considered. The current developments in the portfolios are reviewed. The management considered indicators of the portfolio performance, economic conditions, and quality. The change in estimates imposes a significant impact on the determined level of provision.
Impairment of Assets ensures that the assets of the companies are not carried more than the recoverable amount. The provision of Impairment of Qantas Airways and Commonwealth Bank align with the valuation role. The provision of impairment shows the actual value of the assets. Therefore, the assets of both the companies are carried out not more than recoverable amount. Mutilation loss is the benefit amount that surpasses the regain able amount. The impairment loss account of the companies shows the amount of assets exceeding its regain able amount. The actual cost of assets of Qantas Airways and Commonwealth Bank are shown in the financial report of companies (Holton, 2012). The profit and loss statement of both the companies shows the profit or loss of current accounting year which also helps to determine and evaluate the actual of the companies. The carrying amount is the amount at which the possessions are identified in the balance sheet after subtracting accumulated impairment losses and accumulated depreciation. The superior the reasonable cost of the assets, least would be the discarding costs and its cost in use. Therefore, the financial statements should show the actual value of the assets. The financial statement of Qantas Airways and Commonwealth Bank shows the actual or fair value of the assets. Therefore at the closing stages of the accounting year, both the companies assess whether the assets can be impaired, and if the assets can be impaired, then the recoverable amount of the assets should be calculated. The provision for impairment shows the recoverable amount of the assets. The balance sheet of the companies shows the assets and liabilities of the current accounting year (Moles, 2011). The recoverable amounts of the assets are estimated annually and detailed calculation of the recoverable amount. The actual value of the assets is determined and evaluated as per the Australian accounting standard. The transportation amounts of non-financial possessions are appropriately evaluated at the financial statements to identify whether there is a sign of the mutilation. The assets are the one that helps to generate a flow of cash and are used to determine the recoverable amounts at their net present value. The transportation amounts of financial possessions are assessed at the reporting date and to decide whether they can be impaired or not. The impairment provision of the financial assets is raised with the objective of the damage at a cost to cover the acclaimed assess related losses. Therefore, the reasonable costs of the assets are calculated and are shown in the financial reports. Therefore, impairment of assets aligns with the role of valuation.
Annual Report, (2016). [online] Available at: https://www.qantas.com.au/infodetail/about/investors/2015AnnualReport.pdf
Annual Report, (2016). [online] Available at: https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-reports/cba-annual-report-30%20June-2015.pdf
Holton, R. (2012). Global finance. Abingdon, Oxon: Routledge.
Moles, P. (2011). Corporate finance. Hoboken, N.J.: Wiley.