Nissan revival plan was achieved one year ahead of schedule

Nissan revival plan was achieved one year ahead of schedule In 1999 Nissan had been facing great losses for seven of the past eight years which were now resulting in debts. This was mainly caused by the Japanese business custom of keiretsu investments which left little capital for other investments, like innovations in product designs. This lack of design innovation furthermore caused the Nissan brand to weaken as competitors were producing vehicles more stylish and up to date, reflecting customer demands. To foster a turnaround the Nissan president and CEO Yoshikazu Hanawa formed a mutual beneficial strategic alliance (Global Alliance Agreement) with Renault, allowing both companies to expand in new desirable geographic areas. With his experience in turnarounds Carlos Ghosn seemed to be the obvious choice to lead the Nissan turnaround from both the Renault and Nissan point of view. Evaluation The approach was an overall success in meeting the specific and measurable goal of turning the losses into profits not only on time but 6 month prior to the deadline. The Nissan Revival Plan was achieved one year ahead of schedule and succeeded in reducing their purchasing costs by 20 % which meant that they approximately reached the level of Renault. The large emphasis Ghosn placed on the execution also gave him an edge as this phase is much more demanding in terms of communication, meeting objectives on time and budget, potential conflicts with power resources and resistance to change. The respect Ghosn showed for the Japanese culture was vital for the initiatives to succeed, even though I believe it was a mistake for him not to learn about Japan before coming there as it is very easy unintended to insult people from other cultures if you are not familiar with their specific customs, but it also gave him an edge in being open-minded in perceiving the Japanese and Nissan culture. Coming to Japan he only brought three principles of management with him were to be well received and understood by employees: transparency, execution vs. strategy; improving quality and customer satisfaction and reducing costs. Not just anybody could have managed the Nissan turnaround as well as Ghosn did. For instance, A COO from Japan would not have been able to cut back on keiretsu investments. Because of the Japanese business culture to make these kinds of investments and the Japanese emphasis on cooperation and loyalty, it would have been considered to be a sort of betrayal and ultimately would 3 have harmed the Nissan brand even more. Only an outsider with different cultural background could legitimize such a change. The resistance Ghosn eventually faced when ignoring the almost sacred tradition of promoting by education, age and time within the company would likewise have been much more pronounced if the initiative came from a Japanese COO. Resistance to change Ultimately some sort of resistance was inevitable because of the major structural and cultural changes Nissan was facing with Ghosn as COO. People generally do not resist change, per se. but some underlying causes, like lack of understanding, fear of the unknown or fear of an outcome worse than the present situation.1 In this specific case Ghosn went a long way implementing many changes before meeting actual resistance in form of lack of cooperation among employees caused by the elimination of the old promotion system, allowing younger, less experienced employees to be promoted based on their skills and achievements. This resistance was clearly caused by fear of the unknown and fear of loosing/not gaining status by promotions. Resistance is generally a very important form of feedback and Ghosn chose to view the resistance as an opportunity for experience rather than a limitation.2 1 Dent, E. B. and Goldberg, S. G. (1999). Page 26 2 Ford, J. D. and Ford, L. W. (2009). Page 101 3 Nohria, N., Joyce, W. and Roberson, B.(2003). Page 45 4 Ford, J. D. and Ford, L. W. (2009). Page 100 Ghosn has overcome the actual resistance and prevented potential resistance to the cultural and structural changes in large by clearly communicating all initiatives and objectives to all Nissan employees. Communication had previously been a problem within the company but by creating a matrix structure (combining efficiency and effectiveness) and through consistency between his own actions, thoughts and communication Ghosn was making sure that transparency as well as communication within the organization was improved and afterwards maintained, keeping focus on the strategy.3 Likewise by creating the Cross-Functional Teams, he sought to build engagement and participation and made sure that the employees would have a sense of ownership over the Nissan Revival Plan and motivate communication across departments, stimulate future risk-taking and responsibility as well as regaining confidence in the companys future. Mitigating resistance by involvement and communication are generally very e ffective and will increase employee commitment to execution.4 4 The former lack of accountability and acceptance of responsibility among employees was eliminated by directly assigning responsibility and accountability and encourage people to take risks. This was accomplished in part by monetary rewards and stock options whenever the actions led to increase in operating profits or revenues.5 The previous consensus mentality at Nissan seems to have been: à ¢Ã¢â€š ¬Ã¢â‚¬ ¢If everyone one is responsible then no one is accountable, and nobody gets punished,à ¢Ã¢â€š ¬- which was affecting risk-taking and slowing decision-making processes across the company. 5 Fu, Dean and Millikin, john P. page C553 Organizational culture As mentioned above, the understanding and respect Ghosn expressed for the Japanese Nissan culture and the fact that he communicated his wish to work through this culture were vital for his acceptance within the organization. He made it clear from the very beginning that he too had a personal stake in the outcome and thereby created a sense of cohesion with the employees. His visibility in the organization from day one and the consistency between his communications and actions was a new but welcome change that made him human in the eyes of the employees. This transparency and consistency together with his explicit promise to respect the culture also helped building a sense trust and thereby employee support for most of Ghosns change initiatives. The Nissan president and CEO, Yoshikazu Hanawa, had a positive attitude towards Ghosn and his experience and abilities in turnarounds, since he explicitly asked Renault to send Ghosn to Nissan to lead the changes. But because Ghosn was a foreigner and not accustomed to the Japanese way of doing business, several industrial business analytics expressed scepticism and concern for this arrangement. It is likely that middle-managers and higher-level-managers have been influenced by these critics and therefore had a negative attitude towards Ghosn as COO, but if they did, they did not make much fuss about it. 5 National culture When you consider the differences between Ghosns leadership style and the Japanese (Nissan) way of doing business, it is actually a bit of an achievement that resistance did not arise earlier and more pronounced than it did. The cultural differences between Ghosn, with his experience in working in organizations with strong corporate cultures, and the Nissan organization, with its weak culture traits, were very pronounced and had great potential to cause some trouble along the way, but it takes two to tango, and one of them has to lead. The initiative of putting together Cross-Functional Teams had great potential for meeting resistance in part because of the Japanese tradition of reaching consensus when making decisions. In addition, if every member of a Cross-Functional Team had to make sure, that their respective departments were supporting every suggestion, then the decision-making process would not only have been slowed severely but would have staled. It is also very likely that the employees at Nissan would have resisted the Cross-Functional Team initiatives because of the Japanese culture of loyalty and cooperation within departments but not necessarily across departments (especially not in troubled times) caused by the weak organizational culture. Early on Ghosn became aware that in order to turn Nissan around, he would have to address some of these cultural issues in order to get to root of the problems and meet the overall goal of creating profits. First and foremost, he would have to communicate and make understood the importance of meeting customer wants and needs (included a radical change in the decision-making processe).6 The management would have to create a shared vision (or long-term plan as opposed to their usual sort-term). Management at Nissan was displaying tunnel vision and was focusing on regaining market share instead of increasing margins and product innovation to meet customer demands.7 The emphasis placed on informal contacts and information, complicated knowledge sharing across the organization, as nothing was written or formally communicated, which also slowed decision-making processes. He would have to overcome these cultural obstacles (underlying problems) before addressing the real problems at Nissan. 6 Nohria, N., Joyce, W. and Roberson, B.(2003). Page 46-47 7 Fu, Dean and Millikin, john P. page C549 6 Luck and timing The timing for these changes was absolutely perfect. Had Ghosn and his Cross-Functional Teams tried to implement the same changes a few years earlier, they would most likely have met great resistance and possible failure. But because of the resent bankruptcy of the major financial house, Yamaichi, and the lack of bailout by the Japanese government, the employees at Nissan began to take their situation seriously and this imposed a sense of urgency among the employees. This sense of urgency helped push changes by making the employees more willing to cooperate and implement the proposed changes as well as taking more risks in order to turn the company around. This willingness for taking risks decreased the previous fear of making decisions (especially faulty decisions) which decreased the need for consensus decision-making , which again increased the speed with which decisions was able to be made. This further fostered motivation for innovative proposals for the product line, which had a positive effect on the Nissan competiveness and on consumer satisfaction. In short, the bankruptcy of Yamaichi was a stroke of luck at the exact right time to help kick-start the major changes at Nissan, especially in the minds of the employees. Looking forward In the next few years (2005) Ghosn will have to return to Renault to take over as CEO (his lifelong dream). The right replacement for his job must ensure continuous growth and success, keeping focus on customer needs and increases in profit as well as to nurture the newly accomplished sense of urgency to keep driving employees towards continuous improvements (Nissan 180). A successor should, besides the above mentioned, be able to create a balance between long-term and short-term objectives to ensure that employees do not fall back into old habits.8 Constantly setting short-term objectives, aligning them with long-term objectives will enhance motivation among Nissan employees as they will see their effort and hard work paying of. 8 Griswold, H. M. and Prenovitz, S. C.(1993). Page 5 9 Krackhardt, D. and Hanson, J. R.(1993). I would recommend Ghosn to use the network analysis9 as a tool for helping him making the best possible decision, ensuring that the person he will choose is trustworthy among employees, accountable and responsible, has influential power. The friendship network is always a good place to start, but he should be sure to mad both the communication network and advice network as well. Perhaps there will be an obvious overlap between the three. 7 Conclusion The Nissan turnaround was a great success in that it met measurable objectives and accomplished to overall strategic goal of increasing profits within the schedule. By approaching the Japanese and corporate Nissan culture with an open mind, Ghosn was able to gain the employees trust. His approach to the cultural differences combined with a great stroke of luck, turned the challenge into and opportunity and he was thereby able to meet the overall goal. In facing the fundamental problems within the organization; lack of clear profit orientation, insufficient focus on customers and too much on competitors, lack of a sense of urgency, no shared vision or common long-term plan, lack of cross-functional, cross-border, cross-cultural lines of work, he had to bend the rules of engagement by changing large parts of the Nissan culture. More specifically, based on the recommendations from the Cross-Functional Teams, he implemented some rather radical changes on the Japanese traditions of doing business, in order to help Nissan get back on track. Even though he was hereby violating his prior commitment to be sensitive to the Nissan culture, he did not experience serious resistance in doing so, because it was ultimately Nissan employees suggesting these changes, he was just executing them. In choosing his Successor Ghosn should map the informal networks within the organization, emphasising on trust, accountability and power to create change. 8 List of literature  · Dent, E. B. and Goldberg, S. G. (1999). Challenging resistance to change. Journal of Applied Behavioral Science, 35(1), 25-41.  · Ford, J. D. and Ford, L. W. (2009). à ¢Ã¢â€š ¬Ã¢â‚¬ ¢Decoding resistance to change.à ¢Ã¢â€š ¬- Harvard Business Review, 87(4), 99-103.  · Fu, Dean and Millikin, john P. (2003) à ¢Ã¢â€š ¬Ã¢â‚¬ ¢The Global Leadership of Carlos Ghosn at Nissan,à ¢Ã¢â€š ¬- Thunderbird The American Graduate School of International Management, C546 C556  · Griswold, H. M. and Prenovitz, S. C.(1993).à ¢Ã¢â€š ¬Ã¢â‚¬ ¢How to translate strategy into operational results.à ¢Ã¢â€š ¬- Business Forum, 18(3), 5-9.  · Krackhardt, D. and Hanson, J. R.(1993).à ¢Ã¢â€š ¬Ã¢â‚¬ ¢Informal networks: the company behind the chart.à ¢Ã¢â€š ¬- Harvard Business Review, July/August, 104-111.  · Nohria, N., Joyce, W. and Roberson, B.(2003).à ¢Ã¢â€š ¬Ã¢â‚¬ ¢What really works.à ¢Ã¢â€š ¬- Harvard Business Review, 81(7), 42-52.

Amiri Baraka- Black Arts Movement

The Black Arts Movement Experience The spirit of the 1960s’ Black Arts Movement is captured in Amiri Baraka’s â€Å"AM/Trak,† which addresses the theory of the underlying relationship between art and culture. This simple theory of how culture works and how art reflects and influences the culture that produces it was the whole purpose of the literary movement led by Baraka. In order for one to understand their own experiences, they must acknowledge what factors have influenced how they have shaped their lives.By doing so, they will self-consciously discover and create themselves. The basis of Baraka’s poem, â€Å"AM/Trak† illustrates the defining concept of the Black Arts Movement; the notion of creating identity influenced by experiencing racial and social alienation. The development of a modernized black culture is continually drawn to question because there are many outliers that can influence the basic fundamentals of experience. â€Å"What make s experience such an important concept for Baraka is how it frames the relation between the individual and the collective†(Punday 782).The Black Arts Movement was a period of an assembled reaction against several things including the Korean War, capitalism, and the assassination of Malcom X. Although Baraka incorporates these historical events into â€Å"AM/Trak†, the history of the Beats is approached more by expressing an individual’s reaction, rather than a single technical change or influence of history on society. The appreciation of the degree of exposure from an artist or individual models how the Beats linked the identity of black culture to specific trials and tribulations.A desirable relationship between culture and society is a focalized theme in African American literature, but has been obliterated by the constant severance between historical transitions and the lack of ethical alertness (Quayson 1). Isolation of the African American population from w hite America has been influenced by harsh racism and inequality for several centuries. Although the discrimination thrived for thousands of years, the collective attitude towards the relations of the past began to deviate into a different outlook in the 1960s.The black community began to celebrate an emphasized change when exercising their self-proclaimed freedom of personal expression to improve social and economic conditions of the African American community (Yost 2). In order to establish a distinct black identity against the social reality of separation, they incorporated music, literature, and other forms of art as a way of advocating their presence not only in the United States, but the world.Baraka captures the true meaning of the new scholarly awakening with the influence of the Beat-generation by describing John Coltrane in â€Å"AM/Trak†, in which he uses a distinct style of writing to portray not only the life of the artist, but specific annotations of his music. T he musical embodiment of his work prevails that he was undoubtedly a major contributor to the spirit of the 1960s’. By analyzing Coltrane’s passion and transformation during this decade with extreme expression and struggle against racism, â€Å"AM/Trak† is brought to life: Trane was the spirit of the 60’sHe was Malcom X in New Super Bop Fire Bahhhhhh Wheeeeeee . . . Black Art!!! (152-155). The poem is a clear representation of not only the musical development of John Coltrane’s career and repressed life, but also the importance of how African-American musical expression extrapolates the expectations and contributions of individuals under the pressure of alienation (Quayson 3). According to literary critic, Henry Lacey, Baraka uses imagery to encompass the variety of ways the poem portrays the inspiring musician to be the â€Å"interpreter of the Black experience† through his music (Lacey 14).The different stages of achievements, hardships, a nd responses during Coltrane’s life are a direct narrative of the same ones produced throughout the history of the Black American life. There is an undeniable similarity of technical elements displayed in Amiri Baraka’s writing that support the same individualist revolution. One painful aspect of the African American experience begins with the lack of consciousness influenced by authority and pressure. Baraka begins the second section of the poem by describing the early experiences of Coltrane’s career in a very degrading fashion.The mood of the poem immediately digresses when Baraka mentions the names of alto saxophonist, Johnny Hodges, John Burks Gillespie, and Eddie Vinson and Blues vocalist, Big Maybelle (Lacey 15). Amiri even incorporates an allusion from Langston Hughes poem â€Å"Jazzonia,† in which he writes †Trees in the shining night forest† (Lacey 16). The tree is used as a direct reference to the lack of originality Coltrane embodi es while he works with the Joe Webb Blues Band, followed by Miles Davis.As the poem continues, the depression of the main character develops into a substance addiction and even an abusive relationship with a fellow musician, Davis. In fact, Amiri uses the word â€Å"honk† to symbolize the repetition of his continued unimportance at performances and as cry for help in the only way he knew how to; musical expressionism. It was not until Coltrane could accept his past and everything he had learned, that he could regain full consciousness of his true identity and potential future as a great musician.Similarly, the Black Arts Movement began in spite of depression and the constant repetition of haunting racism. More specifically, the death of civil rights activist, Malcom X, hindered Amiri Baraka’s determination to reform the presence of the African American culture in the United States. Consequently, the African American culture endured a period of recovery, as did Coltrane . Coltrane quest to continue searching for his identity as a musician began again by joining Thelonious Sphere Monk, co-founder of bebop, in part four of â€Å"AM/Trak† (Lacey 18).Baraka’s disjunctive mood swings represent how Coltrane conveys his emotions with Monk’s unique style of expressionism and unexpected musical transitions to understand music on a deeper level. Which then leads to the entire Be-bop movement. Coltrane uses this time as a period of regaining consciousness of the experiences that have shaped him. There was nothing left to do but be where Monk cd find him that crazy mother fucker duh duh-duh duh-duh duh duh duh duh duh-duh duh-duh duh duh duh duh duh-duh duh-duh duh duh duh uh Duuuuuuuuuuuuhhhhhh (71-80). At first glance, the lines representing Monk’s compositions differ from any syntax or vocabulary used in the previous allusions. Baraka uses the distinct sounds of Monk’s work in a disjunctive manner that can only be approach ed if read aloud. When read aloud, the simple word transforms into a series of playful melodies. â€Å"Trane stood and dug / Crazy monk’s shit,† provides substantial evidence that the short time spent with Monk, Shadow Wilson, and Wilbur Ware had a lasting impact on John Coltrane’s career.In fact, it also suggests the sources essential to his success in music were also responsible for shaping his identity despite past alienation and struggle. Similarly to many African Americans during the Blacks Art Movement, Coltrane was allowed to completely expose himself. â€Å"This was Coltrane’s College. A Ph motherfuckin d / Of Master T Sphere† (100,104). As Amiri Baraka wrote the poem, he also established symbolism that the reader may relate to exemplify Coltrane’s efforts to battle several obstacles.Accordingly, in American society graduating college and especially receiving your PhD is one of the highest accomplishments recognized in our country. U tilizing this metaphor near the end of section four not only summarizes his success, but also leads the reader to question, ‘What’s Next? ’ because of the lengthy section that follows. â€Å"AM/Trak† undergoes another mood change as section five introduces the destructive forces of class struggle and maintaining true identity after being exploited by the public.Although the poem portrays the hardship of life of a musician and inspiration leader, Lacey refers to Coltrane as the â€Å"prophetic voice of his age† (Lacey 18) or as described in the poetry â€Å"A man/ black blower of the now† (121-122). However, Baraka does not immediately persuade the reader to believe that Coltrane has collectively reshaped the Be-bop movement and the black cultural identity; he forces them to establish an answer themselves based on their individual experience after reading the poem.Based on the dynamics of writing style portrayed in the poetry, Coltrane influen ces future musical generations to come with the creative features within that clearly influenced the Black Arts Movement within the text, the validity of the following quote by literary critic, Joyce A. Joyce, â€Å"An understanding of Negro expression cannot be arrived at without a constant reference to the environment which cradles it,† can be useful in making a final decision as the reader. Amiri Baraka continues the poem by concentrating the rest of the text on his own impression of Coltrane’s influence on the Blacks Art Movement, musicians, and society.He precisely acknowledges the relationship between the collective and individual response to the end of the revolution of identity and creation of the reputable quartet: â€Å"Jimmy Garrison, bass, McCoy Tyner, piano, Captain Marvel Elvin / on drums, the number itself-the precise saying / all if it in it afire aflame talking saying being doing meaning (169-171). The quartet inspired the African American community t o become believers and to preserve their true identities despite social alienation and harsh racism.If the band expressed their opinions and identity freely, then the entire black culture should have possessed the same rights without limitation as well. Fortunately, at the end of the poem, the Black Arts Movement was reflected as the turning point in accepting cultural identity; a representation of their contributions that shaped the historical experience. But did the Black Arts Movement really change â€Å"black† and â€Å"white† cultures and criticism? Literary critic, Joyce A. Joyce disagrees with the idea that white America has changed its attitude toward the African American population.Although there has been a significant transformation in the merger of black literature and white literature in our society through out the past century, African Americans are usually forced to adopt the mainstream values and lifestyles of those of in the modern American society. Joy ce disassociates Black literary criticism with mainstream analyses because African Americans have a unique duty to express their own ideas without a predetermined and uniformed consciousness based on culture or even color (Joyce 339-341).The poet’s opinions remained somewhat vague until the narration of the poem alters from Trane to Amiri Baraka, the poet himself. His vulnerability exposes his current condition and state of mind when recollecting his wearisome life compared to Trane’s portrayed personal anecdote expressed in his music: ( I lay in solitary confinement, July ‘67 Tanks rolling thru Newark and whistled all I knew of Trane my knowledge heartbeat and he was dead They saidWhen Baraka was confined in prison for the Newark riots of 1967, Lacey notes that â€Å"the poet attributes his survival to the memory of Coltrane’s music† (Lacey 19). As the poem concludes, Baraka decides to choose life over death because he is influenced by character of his own work of art and the actual inspirational of the power of his music. Most scholars would agree with Gayle, Jr. claim that, â€Å"The question for the black critic today is not how beautiful is a melody, a play, a poem, or a novel, but how much more beautiful has the poem, melody, play, or novel made the life of a single black man?How far has the work gone in transforming an American Negro into an African-American or black man? † (Joyce 340). This is perhaps an attempt to illustrate the fact that both the artist lives are surrounded by changes revolved around freedom of expression through art and alienated culture. Without enduring these experiences, good or bad, the identity of an individual cannot be defined, nor the basis of an individualistic black culture. Work Cited Lacey, Henry C. â€Å"Baraka's â€Å"AM/Trak† Everybody’s Coltrane Poem. Obsidian II: Black Literature in Review. 1. 1-2 (1986): 12-21. Print. Joyce, Joyce A. â€Å"The Black Canon: Re constructing Black American Literary Criticism. † New Literary History. 18. 2 (1987): 339-341. Print. Punday, Daniel. â€Å"The Black Arts Movement and the Geneaology of Multimedia. † New Literary History. 37. 4 (2006): 777-794. Web. 7 Dec. 2011. Quayson, Ato. â€Å"Self-Writing and Existential Alienation in African Literature. † Research in African Literatures. 42. 2 (2011): 30-45. Web. 1 Dec. 2011.

Ifrs Impairment of Assets

Intangibles and Impairment of Assets Learn | Consult | Research Intangibles †¢ Identifiable non-monetary asset without physical substance †¢ IAS 38 prescribes special criteria for an asset to be recognized as intangible asset †¢ Tangible or intangible must meet the criteria of asset to be recognized – Controlled by entity as a result of past event – Probable future economic inflow (revenue or cost saving) Recognition †¢ Must meet the definition of asset †¢ Must meet criteria set by IAS 38 – Cost of asset reliably measured – Probable economic inflow Recognized at cost!! Recognition – Internally generated The standard states that expenditure on internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognized as intangible assets (because they cannot be distinguished from the cost of developing the business as a whole). †¢ Similarly, start-up, training, advertising , promotional, relocation and reorganisation costs are all recognised as expenses. Purchased Intangibles †¢ If value of an intangible can not be valued reliably, while purchasing a company, include the value as a part of goodwill A special note on goodwill †¢ Inherent goodwill Vs Purchased goodwill How is it different? – Balancing figure – Cant be sold as a separate asset Research and Development †¢ Research – Initial investigation done to acquire new scientific knowledge or understanding †¢ Development – Application of research findings to design a new product or improve an existing system of product before production R&D treatment †¢ Write-off Research expenses †¢ Development expenses – Capitalize if following conditions met – Technical feasibility – Intention and ability to make, use or sell – Economic feasibility – market for the product/usefulness – Expenditures attributable to d evelopment reliably measured Initial recognition Eg. development expenditure The PIRATE criteria – Recognition Subsequent recognition †¢ Cost model or Revaluation model Revaluation Model †¢ If the revaluation model is followed, the revaluation must be fair value at date of revaluation by reference to an active market. – An active market is a market where all of the following conditions exist: †¢ The items traded are homogenous, †¢ Willing buyers and sellers can normally be found at any time †¢ Prices are available to the public. Amortization and impairment †¢ If useful life is fixed amortize Straight line with zero residual value – Start amortization once asset is ready to use †¢ If useful life is not fixed, test for impairment – Atleast annually (IAS 36) Impairment of Assets †¢ The focus of IAS 36 †¢ Impairment occurs when the carrying value (NBV) exceeds the recoverable amount The Recoverable Amount †¢ The cost or spending on an asse t can be recovered in two ways 1. By selling it 2. By using it †¢ So the recoverable amount is either the value we get from selling an asset (the fair value) or the value we get by using the asset (value in use) Recoverable Amount The FV less cost to sell †¢ FV is determined by; A binding agreement to sell – Current market prices (if active market exists) †¢ Less any selling expenses Value in use †¢ Estimate the future cash flows (inflows and outflows) resulting from the use of the asset and ultimately its disposal †¢ Apply suitable discount rate to come with a PV of future cash flows. †¢ Financing cost and taxes not included Impairment Review †¢ Calculate the carrying value †¢ Calculate the recoverable amount as higher of: – Fair Value less cost to sell – Value in use (PV of future cash flows) †¢ If CV>RV, then report impairment otherwise leave it as it is Reporting an impairment Impairment losses must be recognized i. e. the asset written down to its recoverable amount †¢ Impairment losses are generally charged to I/S †¢ If asset has been revalued, charge to revaluation reserve until exhausted, than to I/S. Page 246 Page 246 Indicators of impairment †¢ External sources – Significant decline in market value of the asset – Significant changes with an adverse effect on the entity in the technological, market, economic or legal environment in which the entity operates – Increased market interest rates or other market rates of return affecting discount rates and thus reducing value in use Indicators of impairment †¢ Internal sources – Evidence of obsolescence or physical damage. – Significant changes with an adverse effect on the entity including: †¢ the asset becoming idle †¢ plans to discontinue or restructure an operation to which the asset belongs †¢ Plans to dispose of it earlier than expected †¢ reassessing the useful life of an asset as finite rather than indefinite – Internal evidence available that asset performance will be worse than expected.

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