Companies are often faced with the aspect of having to test the value of an asset on their books to see if it has been impaired.

Thecompany uses one of two values in the testing that is compared to thebook value of the asset. One of those values is the present value of thefuture cash flows and the other is the value of the asset on the openmarket. Both of these values involve estimations as to the true value ofthe asset.

What do you feel are some of the issues that could arise from these types of situations? Why do you feel they are issues?

Just do response each posted # 1to 3 only

Posted 1

Myfirst issue is as the professor stated, accountants are not appraisers.They do not have the ability predict future outcomes. I currently have areal estate license, one of the things that I have to educate myclients about, that are looking to sell their homes, is that they cannotset their on selling price. I let them know that I understand whatamount you want but you also have to understand that the market isdictated by the buyers. If there are several homes in the area for saleof similar style and features, you are not getting more than the marketrate. When you are the only house being sold in the neighborhood thenyou can manipulate your way to the price you want.

That is the way I see asset valuations. How can I tell now about thefuture if their will be other assets in the market that will make thevalue of my asset decrease or if I will be the only one selling my assetat that future time. I can not tell. Just like the Covid-19 came fromno where. People did not know three years ago that they were going tohave to sell of their store/office/restaurant equipment for suchdiscounted rates because more and more placed are going out of businessand goods are currently saturating the market.

If we lived in a perfect world accountants can be appraisers, andforecasters. They can estimate a price and the future value, and nothave anything go wrong and get that price for their assets. But we donot live in a perfect world, everything that can go wrong will go wrong.You might not get the full use from an asset, or their might be downtime for repair etc. the possibilities are endless.

Posted 2

Whatis great about being an accountant is the money whether it is thepresent or future, it is not our money. We can tell you how much moneyyou have and how many years of depreciation is left on a big tractor,but it is not our money. I see an estimation as a gamble, gambling issomething I steer away from. Yet whether it is a guaranteed profit and avalue is guaranteed to increase or decrease, it is a gamble. Investorsand shareholders must gamble their money into assets they believe in,and maybe they might just get a hit (Kieso, Weygandt, & Warfield,2018). Is an open market a greater opportunity for a larger gain whetherpresent or future, open to any bargain or impairment at any time?

Ibelieve what would work best is going by the quote, “Do not put allyour eggs into one basket”! A company can trade, hold, or in

vest,there are many ways a company can test present value and future cashflows. An investor is better off doing tests, they may run into manytests with out comes of a loss. What we must do as accountants isprovide the most obvious data available during a present period ormoment. A loss or gain could be caused by our valued information, orinformation can be considered an asset, we are assets, and we make senseof values. We do not predict or estimate, the information we provide isthe value a company will use to decide what they choose when makingpredictions or estimations (Kieso, Weygandt, & Warfield, 2018).

Posted 3

Whena company buys an asset they choose a method to depreciate and theperiod of time that the asset is expected to benefit the company. Thekey word here is ‘expected’. Many issues arise that can cause an assetto not last as expected. It may wear out sooner than expected, becomeoutdated due to changes in technology, among many other reasons. Whenthis happens the carrying value on the company’s books is no longeraccurate and must be evaluated for impairment.

‘Todetermine whether an asset is impaired, on an annual basis, companiesreview the asset for indicators of impairments-that is, a decline in theasset’s cash-generating ability through use or sale.’¹ Usersof financial statements are assuming that the company is selecting thebest depreciation method and useful time period, and that their annualvaluation of assets is made in good faith. I worry that it could beundetected if a company chose to misrepresent these numbers tomanipulate their net income. Since depreciation expense and impairmentloss both reduce the net income of the company these estimations becomeimportant. Are there new rules and regulations that could helpstreamline this process? I believe there could be, but until then asaccountants we will act in good faith to give the most accuratefinancial report possible.