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An assessment of accounting practices for asset impairments is especially important in the context of financial reporting quality in that it requires the exercise of

  1. An assessment of accounting practices for asset impairments is especially important in the context of financial reporting quality in that it requires the exercise of considerable management judgement and reporting discretion. The importance of this issue is heightened during periods of ongoing economic uncertainty as a result of the need for companies to reflect the loss of economic value in a timely fashion through the mechanism of asset write-downs. There are many factors which can affect the quality of impairment accounting and disclosures. These factors include changes in circumstance in the reporting period, the market capitalization of the entity, the allocation of goodwill to cash generating units, valuation issues and the nature of the disclosures.

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Discuss the importance and significance of the above factors when conducting an impairment test under IAS 36 Impairment of Assets.

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