02-14-2011, 05:16 AM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by bilalfca</i>
<br />Salam to all.
Dear Mr Umer, i would like to tell you that when a co. decides to purchase an asset, it makes a budget known as Capital Budget. in that, the co. estimates the VIU & all the related probs. so its certain that when an asset is purchased, a co. has estimated VIU of that asset. the co. will compare VIU with FMV less Cost to sell & take higher one as RA.
compare RA & BV & proceed................
the basic point is that VIU is estimated before an asset is purchased...
n one more thing, why will a co. purchased an asset & then doesn't use that for next 3years?
any ground reasons?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
There may be a case where value in use of an asset cannot be estimated. And also there may be situations where an asset is not put to use as it was intended to before purchasing, there could be many reasons for such situation to arise.
IAS 36, Impairment of Assets, clearly explains that where the VIU of an individual asset cannot be determined as it doesn't produce independent cash flow, VIU of the Cash Generating Unit should be used in calculating impairment if any. If required it can be explained further. So there may not be a situation where VIU of an asset or CGU cannot be determined. And if no smaller CGU can be identified whole of the company or operation should be considered for calculating impairment.
Impairment and revaluation decrease may be a bit confusing. Assets measured at cost model are impaired and assets at revaluation model (any previous surplus is booked) are revalued for any decrease in value. Impairment is charged to statement of comprehensive income, however, in case of revaluation decrease only the amount in excess of revaluation gain of that particular asset is charged the rest is adjusted against the revaluation surplus.
<br />Salam to all.
Dear Mr Umer, i would like to tell you that when a co. decides to purchase an asset, it makes a budget known as Capital Budget. in that, the co. estimates the VIU & all the related probs. so its certain that when an asset is purchased, a co. has estimated VIU of that asset. the co. will compare VIU with FMV less Cost to sell & take higher one as RA.
compare RA & BV & proceed................
the basic point is that VIU is estimated before an asset is purchased...
n one more thing, why will a co. purchased an asset & then doesn't use that for next 3years?
any ground reasons?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
There may be a case where value in use of an asset cannot be estimated. And also there may be situations where an asset is not put to use as it was intended to before purchasing, there could be many reasons for such situation to arise.
IAS 36, Impairment of Assets, clearly explains that where the VIU of an individual asset cannot be determined as it doesn't produce independent cash flow, VIU of the Cash Generating Unit should be used in calculating impairment if any. If required it can be explained further. So there may not be a situation where VIU of an asset or CGU cannot be determined. And if no smaller CGU can be identified whole of the company or operation should be considered for calculating impairment.
Impairment and revaluation decrease may be a bit confusing. Assets measured at cost model are impaired and assets at revaluation model (any previous surplus is booked) are revalued for any decrease in value. Impairment is charged to statement of comprehensive income, however, in case of revaluation decrease only the amount in excess of revaluation gain of that particular asset is charged the rest is adjusted against the revaluation surplus.
