As a result of the recent economic trends, there is a risk that assets may generate lower cash flows than expected. This means that the asset impairments should be increasingly common. Some Europeans regulators have therefore expressed surprise about the relatively low level of impairment losses recognised by many companies in recent years, it is vital that companies adequately identify impaired assets an write these down accordingly. Moreover, companies must disclose useful information about impairments and impairment reviews to the users of their financial statements.

In your report, you are required:

(i) In accordance with IAS 36 Impairment of Assets, discuss when a non-financial assets must be assessed for impairment in Royal Docks. (7 marks)

(ii) Discuss how accounting for the impairment of non-financial assets could lead to earnings management in Royal Docks. (8 marks)

Answer rating: 100% (QA)

1 An impairment test is required for all assets within the scope of IAS 36 when there is an indicati... View the full answer