Financial Accounting Case Study

Another way to treat this provision would be not to recognize at the inception of the lease but directly expense the costs when the required maintenance is performed. Regarding the accrual method in Alternative 1, ASC 360-15-25-5 prescribes “the use of accrue-in-advance (accrual) method of accounting for planned maintenance activities is prohibited in annual and interim financial reporting periods.” This is consistent to FASB’s opinion

We will discuss whether the Company’s approach for testing goodwill for impairment after recognizing an impairment charge related to a long-lived asset group classified as held-and-used is appropriate. This issue pertains to whether it is feasible to have a long-lived asset impairment without goodwill impairment.

According to Section 360-10-15-4, the scope of the standard applies to transactions and activities related to recognized long-lived assets of an entity to be held and used, including capital leases of lessees, long-lived assets of lessors subject to operating leases, proved oil and gas properties that are being accounted for using the successful-efforts method of accounting, and long-term prepaid assets.

As part of the expansion plan, Wie will acquire some used equipment by signing a zero-interest-bearing note. The note has a maturity value of $50,000 and matures in 5 years. A reliable fair value measure for the equipment is not available, given the age and specialty nature of the equipment. As a result, Wie 's accounting staff is unable to

Smooth Sailing has the indications b), d), f) and g) in their operations related to the cruise ship. Regarding to indication b), the presence of pirates greatly affects the cruise ship’s market because customers are afraid of using the cruise ship. The cruise ship’s book value is $4.6million, while the estimated fair value is $3.0milion which is much less than $4.6 so this meets the description of indication d). The presence of pirates greatly affected cruise ship’s operations and economic performance so indications f) and g) also exist. Based on these indications, Cruise ship should be impaired.

(3) What amount of loss is allocable to the limited partner, Dr. Ashin, in this taxable year?

The authoritative guidance for asset impairment is to ensure that impairment is recorded and dealt with as depreciation. The scope of the standard is writing off of assets and depreciation. According to the guidance of 360-10-35, it address how long-lived assets that are intended to be held and used in an entity’s business shall be reviewed for impairment. The impairment loss can only be recognized if the carrying amount of a long-lived assets is not recoverable and

We are writing to you regarding the inquiry we received over the possible impairment of your cruise ship. Our response was formulated using our extensive knowledge of the U.S. Generally Accepted Accounting Principles and referring to ASC 360-10 over the testing of impairment. After preforming recoverability tests, we have concluded that your cruise ship is impaired, and an impairment loss of $1.6 million should be recorded on December 31, 2010. In the second scenario, the asset is recoverable because the expected future cash flows are greater than the carrying value; therefore, the cruise ship is not impaired. The rest of this memo will describe how we calculated the impairment on your cruise ship.

The Beary Beary investment should recognize an other-than-temporary impairment. O.T.T. Incorporated established intent to sell by creating a policy that required the sale of the security when the fair value became less than the amortized cost. As of December 31, 20X1 the amortized cost of the debt security ($95) and the fair value ($88). And the company does not expect to recover the entire amortized cost basis of the security. O.T.T. Incorporated should record an impairment loss of $7 ($95 - $88).

ii. Using double- declining method, the first year ending balance of $6,404 is subtracted form the proceeds of the sale netting in a gain of $1,096 on the disposal. Once this is subtracted form the previous years depreciation $4,269, you get a total income statement impact of $3,173.

According to IAS 36.12 Ida should test for impairment when the asset’s market value has declined. Given the information provided that the competitor’s sold their building for less than the asking price suggests to management that the fair value of the building may have declined. An impairment loss should be reported, “If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss” (IAS 36.59). IAS 36.74 states that the recoverable amount of a cash‐generating unit is the higher of the cash‐generating unit’s fair value less costs to sell and its value in use. Ida’s recoverable amount would be its value in use of $4,000,000. Therefore Ida should report to its parent an impairment loss of $500,000 (Carrying value minus the Value in use).

LL shall provide improvement allowance the sum of $178,225.32 ($60.13 per rsf of the premises) for TT improvements in the premises. If LL contribution amount exceeds the total amount for improvement allowance, then all excess costs shall be paid to LL by TT in advance within 5 days. Any portion of of the LL contribution amount be available for disbursement by LL in connection of the improvements 9 months after the date of lease.

Because $2.3 million is less than the Carrying Value of the asset group of $4.7 mm, ($2.3 million < $4.7 million), The Impairment loss will be Fair Value of Asset less carrying amount of asset group.

The directors have not recognised an impairment charge against goodwill. The firm made the decision not to charge the resulting impairment of goodwill on the difference between the recoverable amount and the carrying value and record the impairment loss and associated accumulated Impairment loss in the Financial Statements. The tourist park was independently valued. As per AASB 136, the impairment loss to goodwill and accumulated impairment losses should both have increased by the same amount, but this was not done, due to a number of reasons provided by the Directors in Note 11 Disclosure to the Financial Statements 2012. The same chain of events occurred a year earlier in 2011 and the Disclosure Notes to the Financial Statements reflected the decisions made by the Directors, yielding the same Audit Opinion – a qualified report on the basis of a breach of AASB 136 (Impairment of Intangibles).

Leasing is a very important activity for organizations. Under existing accounting standards, a majority of leases’ transactions are not recorded on a lessee’s balance sheet, since only financial leases will be recorded on the balance sheet. Operating leases will only be disclosed in the notes to the financial report. The existing accounting models for leases require lessees to divide their leases as two types: finance leases (e.g., a lease of equipment or office buildings for its whole economic life) or operating leases (e.g., a lease of office space for short time, like 5 years) and to calculate for those leases in different methods. For finance leases, lessees recognise lease assets and liabilities on their balance