Requirement has been ascertained that there has not


             Sims metal management limited conducts an
impairment testing annually for goodwill and other intangible assets. Testing
of impairment is conducted when there is objective evidence given by
circumstance or happening of any events. Whenever there exists indication that
it will be difficult to recover the carrying amount of other definite lives
intangible assets as indicated by occurrence of some events and prevailing
circumstances. Allocation of goodwill has been done for impairment testing. The
impairment testing for the cash-generating unit depicts excess headroom of A$
104.1 million for the year ending 30th June, 2016 ( 2018).

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            Sims metal
management conducts the impairment testing of assets by reviewing the amount of
their carrying value and when there exists and indication that assts require
impairment. There is recognition of impairment loss when the estimated
recoverable amount is lower than the carrying amount of such assets. Recognition
of trade and receivables is done at fair value and measuring it subsequently at
amortized cost by deducting any provision of impairment. Trade receivables is
written off against impairment account when it is identified by organization
such receivables become uncollectible. For impairment purpose, the carrying
amount of property, equipment and plant are reviewed and as indicated by
existence of any objective evidence and thereafter there is recognition of
impairment loss.  Intangible assets and
goodwill are tested annually for impairment as indicated by circumstances and
occurrence of events. Assessment of impairment of assets are done by grouping
them at the lowest levels where the cash flows have been separately identified
and they are not dependant of cash flows generating from other group of assets.
Organization conducts annual testing of investment that is made in joint
ventures as indicated by the fact that their carrying value amount cannot be
recovered and there are any circumstances and events (


charge attributable to intangible assets and other goodwill for financial year
2016 stood at A $ 53 million. After the analysis of annual report of Sims metal
management limited, it has been ascertained that there has not been any impairment
charge for the financial year 2015 and 2017 in relation to assets and other
goodwill ( 2018). 



            Sims metal
management limited makes use of assumptions for conducting impairment testing
of goodwill and other intangible assets. Projection of five-year cash flow is
done by organization for computing the value in use and this is based on the
budget after board approval for the year 2017 and 2018 respectively. Historical
average forms the basis of making four year forecast and takes into account
historical value for four years. Projections of five years incorporates margin
and price of commodity that are drawn from past experiences, estimates of
management relating to  inherent impact
on volume of future volatility and other factors relating to current and
expected future economic conditions. Organization also makes the application of
Gordon growth model for the determination of terminal value from the cash flow
of final year. Management makes best estimates in projecting the cash flow by referring
to results that are historical for determination of expense, income, cash flows
for each cash generating unit and capital expenditures (
2018). Value in use of goodwill is determined by using expected future
cash flows. An estimation of CGU’s to intangible assets and goodwill
recoverable amount is required to be made for determining potential impairment
relating to it. Higher of any value in use and fair value less cost to sell
helps in determining CGU recoverable amount. Assumptions concerning growth
rates and discount rates are to be made for the calculations related to
impairment testing.


existence of subjectivity in estimating and making judgment by management has
the possibility of considerably affecting the impairment testing of
organization. Moreover, it would also have difficulties in gaining accurate
inputs required for the impairment testing. Amount that is to be recovered
becomes highly sensitive when there is involvement of high degree of
subjectivity and assumptions cannot be made about terminal growth rate
verification. There is gaming in impairment testing methodology due to
manipulation of recoverable amount, as the management will be acting
opportunistically. Presence of high degree of subjectivity has the likelihood
of impairment testing outcome. It is ascertained after the evaluation of annual
report of Sims metal management limited that there is low prevalence of
subjectivity in testing of impairment of assets. Nevertheless, assumptions and
estimates concerning computation of value in use, discount rate and
determination of cash flow requires judgment of management and there is
possibility that value generated using such assumptions will fluctuate on
substantial basis. Moreover, impairment requirement is determined by impairment
status based on economic events and conditions and specific circumstances (Arrozio et
al. 2016). It is certainly possible that assumptions made by Sims
metal management limited about forward-looking statements will not be
appropriate owing to involvement of subjectivity.


of annual report of Sims metal management limited indicates that impairment
testing methodology of is interesting. The impairment charge of cash generating
unit was impacted by margin pressure that arises from volatility in the prices
of commodities and landscape of competitive market. There were reassessment of US
recycling solutions relating to cash flows and this has indicated the fact that
there is no recoverability of carrying amount of goodwill. There would be
fluctuation in the value of impairment charge recorded if the assumptions about
discount rate keep on changing. Calculations of value in use forms the basis of
estimating recoverable amount and it is performed independently by firm
valuating the assets. Impairment on investment is recognized by organization by
assessing recoverable amount of investments that are made in SA recycling ( 2018).


            Analysis of
annual report of Sims metal management limited concerning impairment testing
depicts that impairment that is recorded in the financial year 2016 involves
impairment that are recognized are offset closely by reversing the impairments
that are recorded in the previous year (
2018). It has been ascertained from the annual report that there has
been impairment reversal in relation to property, plant and equipment. An
insight that is gained regarding impairment is that value of impairment charge
fluctuates if there is any modification in discount rate while all other
assumptions remaining same.