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Discuss the impairment review process and examine the advantages and current criticisms practical

Question 1: Company XYZ extracts oil and accordingly owns a drilling platform in the Arabian Gulf. By the end of the platform’s useful life, the firm is required to remove it and dismantle it. Thus, the firm accounts for the removal and dismantling costs, which are depreciated over the platform’s useful life. Using the below information, you are asked to investigate if there has been an impairment of the platform: A) The carrying amount of the platform in the statement of financial position is £5m. B) The company received an offer of £4.8m for the platform from a neighboring competitor. This potential bidder would take the responsibility of dismantling and removing the platform (including the costs) at the end of the asset’s life. C) The present value of the estimated cash flows from the platform’s continued use is £5.4m, excluding any dismantling costs. D) The carrying value in XYZ’s balance sheet for the provision for dismantling and extraction is £0.8m. Required: 1. Describe in detail what is meant by the impairment of assets. How is it calculated? Include a critical examination of the reasons why it might arise. 2. Using the appropriate IFRS standard and the above details, calculate what the platform’s value should be in XYZ’s balance sheet. What is the amount (if any) of impairment loss? 3. Discuss the impairment review process and examine the advantages and current criticisms of its practical implementation. Question 2: Under Armour, Inc. (UA) is an American multinational sports apparel company that is headquartered in Maryland in the United States. Obtain the annual report of UA for the year ending 2015 (available online at and review the information regarding its acquisitions in 2015. This information is provided in various parts of the annual report, including the financial statements and supporting notes. Prepare a detailed report which includes the following: 1. List the acquisition(s) and their cost(s) made by UA during the year. 2. Discuss potential advantages of each of UA’s acquisition(s) in 2015. 3. Analyse the impact of the acquisition(s) on the group’s consolidated financial statements. 4. Express your views about the goodwill of the group and the subsequent goodwill impairment charges, if any, in the years since the acquisition(s). 5. Critically assess the results of your research in general regarding the reasons for success or failure of acquisition(s). Your answer should be supported with references to specific accounting standards the company follows.

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