Requirement I
In Toll Holdings Limited, impairment needs to be done when the market price of an asset is less than the value recorded in the balance sheet. As per the latest financial statements, one can observe that the corporation has used their business goodwill for the purpose to test impairment (competitiontribunal.gov.au, 2018). It needs to be mentioned that Toll Holdings Limited has complies with the required accounting standards and regulations in order to test their goodwill. With the help of the testing of goodwill, the company will be able to adjust their unrealized gains related with goodwill impairment (Scott, 2015).
Requirement II
It needs to be mentioned that Toll Holdings Limited has followed certain specific steps for the testing of their goodwill impairment. From the latest annual report of the company, it can be observed that the allocation of goodwill is done to the company’s business segments, which represents the lowest level in the company at which the management of goodwill is done (competitiontribunal.gov.au, 2018). In the process of the testing of goodwill, the company uses to compare the asset carrying value required to be tested to the recoverable value related with the future cash flows that is determined for the value calculation (Deegan, 2012). At the same time, the company has taken certain assumptions for the impairment testing of goodwill. For this purpose, the cash flow projection is done based on the forecast of five years. Most importantly, for the purpose of the testing of goodwill impairment, Toll Holdings Limited uses to appoint the goodwill to the cash generating units (competitiontribunal.gov.au, 2018).
Requirement III
It needs to be mentioned that the business organizations have to incur certain expenditures due to the testing of the impairment of the assets and these expenditures are considered as crucial for the companies. There is not any exception of this fact in case of Toll Holdings Limited as the company has also recorded impairment expenditures in their financial statements. The financial statements of the company indicate towards the absence of any expenses related to impairment for the current year (Williams, 2014). However, the total amount of impairment expenditure for the company in the year 2013 was $245.5 million (competitiontribunal.gov.au, 2018). In addition, the company has segregated their impairment expenditures in three portions; they are goodwill expenses, other intangible assets and PPE (property, plant and machinery). However, the latest annual report of Toll Holdings Limited states that the company has incurred $7 million in 2014 and $7.4 million in 2013 as impairment losses on receivables. These are the major impairment expenditures of Toll Holdings Limited (competitiontribunal.gov.au, 2018).
Requirement IV
From the latest financial statements of Toll Holdings Limited, it can be observed that Toll Holdings Limited has taken certain assumptions in order to conduct the impairment testing of their goodwill. They are as below:
Requirement V
From the goodwill impairment testing of Toll Holdings Limited, it can be observed that Toll Holdings Limited has taken into consideration different assumption so that the testing of goodwill impairment can be done in an effective way. In addition, due to the accounting obligation, the management of Toll Holdings Limited uses to review the carrying value of the assets on a regular basis. Toll Holdings Limited recognizes the impairment of any assets when the carrying value of the assets is more than the market value. The amount of impairment losses can be seen in the profit and loss statement of the company and it implies that the revaluation of the assets is done on regular basis. Thus, it can be concluded that there is not any subjectivity involved in the impairment testing process of Toll Holdings Limited that can influence the outcome of impairment testing (Schaltegger & Burritt, 2017).
Requirement VI
The analysis of the financial statements of Toll Holdings Limited indicates towards the intelligence of the company to test impairment and the view has been obtained that subjectivity is not there in the impairment testing process. It implies that the company has not done their impairment testing in any opportunistic manner. Apart from this, the computation of the impairment requires the judgment from the management of the company and the determination of the future cash flow. This can be considered as the most important aspect in the impairment testing process of Toll Holdings Limited. This aspect confirm the fact of the absence of any influence in the process to test impairment for Toll Holdings Limited. However, it needs to be mentioned that there is not any confuting element in the impairment calculation of Toll Holdings Limited as the company has provided proper justification and clarification related with impairment testing in the notes of the financial statements (Bertoni & De Rosa, 2012).
Requirement VII
From the analysis of the impairment testing process of Toll Holdings Limited, it can be observed that the company has complied with the standards of AASB 9 for the classification and justification purpose. Apart from this, from the analysis of the impairment testing of Toll Holdings Limited, one can get effective idea about how the companies use to carry out the process of impairment testing in the organizations. Thus, it can be observed that the business organizations use to do the impairment testing by considering the value of computation.
Requirement VIII
Fair Value Measurement is also known as market based measurement that is not specific for any business organization. The main objective of fair value measurement is the estimation of price of the assets and liabilities at which an orderly transaction for the selling of selling of asset or the transfer of liabilities between two parties based on the current market price. Under the process of fair value measurement, it is the obligation of the companies to take into account the current market value of the assets and liabilities for recording them in the financial statements (Edwards, 2013).
Requirement I
According to the current accounting standard, it is the obligatory requirement for both the lessees and lesser to provide sufficient clarification of their operating and capital lease in the financial statements like balance sheet. Under the current accounting standard, business organizations get the choice to state the lease amount under the head of ‘Assets’ and ‘Liabilities’ for a specific period. However, it is not the obligation of the companies to incorporate the amount of operating lease and capital lease. Thus, it is optional for the companies to present values of operating as well as capital leases (Weil, Schipper & Francis, 2013).
It is the accounting obligation for the firms to disclose all the information of their leases in the statement of financial position or balance sheet. It can be happened that the companies have such greater amount of lease liability that can exceed the original amount of liability of those companies and it can be prevalent from the balance sheet of the companies. For this reason, investors will not be able to assess any information about the lease liabilities of the organizations. Thus, investors will be enabled to be depictive about the financial position of the companies (Horngren et al., 2012).
Requirement II
The earlier lease agreement demands the disclosure of the information of only capital lease instead of operating lease in the statement of financial position. This aspect contributed towards the lack of disclosure for the companies; and bares the investors from getting better understanding related with the uncertainty of the cash flow from lease. Thus, the previous lease act was lacking both qualitative and quantitative information related with the accounting lease in the books of the companies. For this reason, it was not possible for the companies to achieve the desired accounting objectives. Due to the influence of not enough information, the companies fail to present their lease liabilities in a realistic manner (Beatty & Liao, 2014).
In the current lease regulation, there is not any obligation on the companies to report operating lease, but the companies are obliged to make the payment of these lease liabilities. In this way, business organizations are doing manipulation with their liability position by not doing the disclosure of lease liabilities. In addition, the non-disclosure of liabilities is responsible for the existence of gap between balance sheet liabilities and off balance sheet liabilities (May, 2013).
Requirement III
It can be seen that the airline companies have leased large number of planes and according to the earlier lease standers, these companies are not required to present these lease amounts in the balance sheets. The lease accounting standard shows that historical cost is the basis for lease computation (Henderson et al., 2015). This aspect has created huge gap in liabilities as these companies have made large amount of lease for purchasing airlines. This particular aspect has made huge difference in the recorded financial condition and the actual financial condition of these companies and thus, investors became unable to judge the actual financial position of the companies (Warren & Jones 2018).
Requirement IV
The presence of major criticisms are the main reason for the less-popularity of the new standard for lease accounting and this aspect can create hindrances in the implementation of new lease standard (Bevis 2013). The new lease accounting standard will bring some major changes in the statement of financial position as the companies will be required to disclose the lease information in this statement. This aspect will create greater impact on the costs of the companies. There will be rise in the complexities for financial accounting due to the leases in the small assets. In order to change this situation, the only way for the firms is to update their accounting system so that it can lead to better disclosure of financial information (Sharma & Panigrahi 2013). For this reason, the businesses are required to incur large amount of costs and leads to the unpopularity of this standards.
Requirement V
With the implementation of new lease standards and regulations, accountants will be able to make better presentation of financial information as the balance sheet will contain both qualitative and quantitative information regarding lease. The investors will be able to assess the financial information and financial situation of the companies in an effective manner (Taipaleenmäki & Ikäheimo, 2013). The financial statements of the companies will reflect sufficient information related with assets and credit risks of the lesser. All these aspects will lead to the increase in transparency in the financial statements, as there will be more information available regarding operating lease and capital lease (Bazley et al., 2013).
References
Annual Report 2014. (2018). Competitiontribunal.gov.au. Retrieved 25 January 2018, from https://www.competitiontribunal.gov.au/documents/act2016/ATM-3.pdf
Bazley, M., Hancock, P., Fisher, C., Lovell, A., Berk, J., DeMarzo, P., … & DeMarzo, P. (2013). Financial Accounting: An Integrated. Thomson Pty Ltd, South Melbourne.
Beatty, A., & Liao, S. (2014). Financial accounting in the banking industry: A review of the empirical literature. Journal of Accounting and Economics, 58(2-3), 339-383.
Bertoni, M. P. G. V. A. G., & De Rosa, B. (2012). Green accounting: an alternative approach to reporting emission trading allowances in financial statements.
Bevis, H. W. (2013). Corporate Financial Accounting in a Competitive Economy (RLE Accounting). Routledge.
Deegan, C. (2012). Australian financial accounting. McGraw-Hill Education Australia.
Edwards, J. R. (2013). A history of financial accounting (RLE Accounting) (Vol. 29). Routledge.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting. Pearson Higher Education AU.
Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D., & Tan, R. (2012). Financial accounting. Pearson Higher Education AU.
May, G. O. (2013). Financial accounting. Read Books Ltd.
Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues, concepts and practice. Routledge.
Scott, W. R. (2015). Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Sharma, A., & Panigrahi, P. K. (2013). A review of financial accounting fraud detection based on data mining techniques. arXiv preprint arXiv:1309.3944.
Taipaleenmäki, J., & Ikäheimo, S. (2013). On the convergence of management accounting and financial accounting–the role of information technology in accounting change. International Journal of Accounting Information Systems, 14(4), 321-348.
Warren, C. S., & Jones, J. (2018). Corporate financial accounting. Cengage Learning.
Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.
Williams, J. (2014). Financial accounting. McGraw-Hill Higher Education.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download