The Measurement of the Amount of Impairment of Many Types of Assets

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The International Financial Reporting Standards, which are commonly known as IFRS, are unable to provide any guidance for the purpose of having an authorized and agreed way of judging and assigning the level of fixed assets impairment. After determining and issuing the International Accounting Standards number 36, in short IAS 36, the management of IFRS has become satisfied that they have successfully played and performed their job in the most positive way. Unfortunately, this level of contribution from the management of IFRS has only increased the use of subjectivity for the purpose of determining and assigning impairment for fixed assets. A huge amount of possible implications cannot be avoided. Many companies use this type of freedom to determine and allocate that level of impairment that may only support the interests of management at the cost of real owners-the shareholders. By determining the level of impairment for different types of assets, many companies become successful in engineering the type of financial statements that they want to show and declare in the public.

Multiple impacts can appear on financial statements. For example, for the statement of comprehensive income, the impact of impairment would be that it would show less net profit than it could have shown in case of no loss of impairment. Furthermore, this would directly and negatively show its effects on the dividends of the company as well. Due to the occurrence of the impairment loss, the company is required to reduce the amount of profit. Consequently, less amount of dividends would be announced and given to the shareholders of the company. The shareholders could have given more dividends if the company had&nbsp.not shown the occurrence of the impairment loss.&nbsp.Additionally, if the amount of impairment is substantial and material, then undoubtedly, this would negatively impact on the valuation of the business of the company.