An annual report of Costco Wholesale Corporation, the large discount company, contained the following statement: “The Company periodically evaluates long-lived assets for impairment when circumstances occur that may indicate the carrying amount of the asset group may not be fully recoverable”.   (a) What does the concept of impairment mean in accounting?

The errors below were noted after the books of CalMart Corporation were audited at the close of 2021 Indicate the effects of each of the following errors with an O for overstatement, U for understatement and N for no effect in the appropriate column. 2020 2021 Retaine Retained Retained d Earnings,befo Re, Earnings, befo Earning s, after closing Net Net Incom re after Incom re Asset Liability closing closing Asset Liability closing e Failure to record purchases of merchandise on account of P2,000 at the end of 2020. Sale of merchandise on account on December 30,2020 amounting to P2,000 was not recorded until the customer paid his account on january 2021. Depreciation expense on equipment in 2020 was overstated by P1,000. Paid one year insurance premium of P2,000 effective April 1,2020. The entire amount was debited to expense account and no adjustment was made at the end of 2020. On December 31,2020, the Company acquired a parcel of land and a building at a total cost of P5,000,000. The…

When a component of a company's operations is classified as held for sale at the end of an accounting period, The component may not be reported as a discontinued operation until sold. The component will be reported on the balance sheet at the higher of its (1) fair value net of any costs to sell or (2) book value. The company may report the difference between the component's (1) fair value net of any costs to sell and (2) book value as a loss from discontinued operations on the income statement. None of these choices apply.

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