Question

Q4. (25 marks) Imagine you are planning to raise capital for the firm, you are wary about shareholders, which accounting ratios could address the concerns of those stakeholders regarding efficiency of the assets and cashflow? Explain in detail. I

Answer 1

Ratio which could address about the stakeholders concern about defficiency of asset and cashflow

1. Return on Asset which will calculate the return earned or generated using the asset of the company and it is good measures to address the concern

2. Current ratio in which calculate the times of cuurent asset can cover up the current liability

3. earning per share under this ratio it is calculate the earning attributable for each share's

calculation of impairment and entries under IFRS

recoverable amount is higher of "value in use" and "fair value less cost to sell"

3300000 - value in use and 3200000-75000=3125000 - fairvalue less cost to sell

recoverable amount = 3300000

carrying amount = 3600000

impairment loss = 300000

so the impairment will charge on the goodwill first and if the goodwill remaining then it tis charge to other assets on pro-rata basis

goodwill = 1350000-300000=1050000

journal entries

DR impairment loss $300000

CR goodwill $300000

under ASPE

impairment loss = carrying value - fairvalue = 3600000 - 3200000 =400000

goodwill = 1350000 - 400000 = 950000

entries

Dr impairment loss $400000

Cr Goodwill $400000