Case Study on: Selling of Assets and Transfer of Liability

Question 1:

a) Entities in the process of identifying specific market participants for the selling of assets and transfer of liability needs to follow the guidelines implemented under the standards of AASB 13. The entities therefore under the specification mentioned in the ASSB 13 are not required to identify specific market participants (AASB 13, 2015). IFRS 13 in the same context states that the methods that need to be considered for determining value of the assets and liabilities should be as per the methods prescribed under the said standard. 

However, the in regards to the guidelines the organizations have to undertake the following aspects:

• Determine the assets and liabilities of the market participants

• Identification of the most profitable assets or liabilities

• Prior entering into transaction with the market participants the entity needs to determine the potential market for the sell and transfer of the asset (IFRS 13, 2016)


b) AASB 13 and IFRS 13 of the impairment and fair value measurement states that the entity willing to enter transaction with market participants have to undertake the assumption made by the market participants in respects to their assets and liabilities. Further the present market condition while estimating value of the assets and liabilities should be taken into account under the guidelines formulated in the IFRS 13 (Stier & Sellhorn, 2019). Moreover, the AASB 13 mentions that the assumptions made by the market participants make the assumption in accordance to their economic interest and advantage. 

c) In the process of entering into a transaction the price assumed for the assets and liabilities by the market participants is a much significant factor.  At time when entity in case any disagreement regarding the price for selling of assets and transfer of liability can opt for other advantageous prospect, however, the price for the same cannot be disregarded. The reason for the same is that the price in a particular market may not provide the value which at the same time can indicate a different value in other market. In addition, it has been additionally noticed that without discernible market so as to acquire data in regards to estimating the substance by considering the presumption of market members makes a base so as to decide the significant cost for selling or transfer of asset separately. Since the guideline prescribes utilizing of most productive market for the deal and move of the benefits and liabilities to an element, in this manner, it very well may be said that in case of contradiction perusing the reasonable worth value the cost can’t be dismissed because of the distinction in incentive in various market.

Question 2

Issues related with basing depreciation cost with the authentic expense essentially prompts unspecific valuation of the advantages as it does not think about the present estimation of benefits. In addition, in the technique for verifiable costing does not give sufficient extension including the deterioration cost as the devaluation is included based the recorded cost of the advantage maintaining a strategic distance from the expense of procurement of the benefit. It has been further noted that the approach under historical costing is stagnant which ignores the present market value of the assets rather estimates the cost based on the cost of acquiring the asset. The reason directors chooses the cost model is because of the way that cost model methodology is adaptable in nature as it permits to adjust as per the necessities and prerequisites of the substance (Vincent, ChenaEdmund, & C.KeungbI-MinLina, 2019). Also, with the use of cost model the supervisors can execute powerful observing practice, which permits deciding the individual efficiency of representatives in the activities.  Further in case of preferring cost model by managers in valuating land, property and equipment the benefits can be cited as follows:

• Reduces expenses or cost and enhances the profit potential

• Considers the indirect cost involved with the purchase of the assets

• Allows to implementing strategic planning and decision making

Question 3

IAS 36 formulates the guidelines and principles of estimating and determining the carrying amount and the recoverable amount of the CGU associated with the assets and liabilities of an entity. Under the principles set in IAS 36 it has been stated that in the event of where CGU has an indication of being impaired then it can be considered that the carrying amount of the CGU has increased the amount of recovery. So as to recognize the CPU in regard to Saferide Bus Company the administration according to the norms set under the IAS 30 needs to successfully screen the working exercises of the substance and its basic leadership process for the continuation and transfer of its tasks or resources. Additionally, the IAS guidelines further require complete honesty of the CGU identified with the altruism exclusively or with a gathering. The valuation of the CGU should be according to the suggested techniques under IAS 36.  The CGU test for impairment is recommended under the IAS 36 for ensuring that the carrying amount of the assets does not exceeds its recoverable amount (Andre, 2018). However, intangible assets and goodwill is treated in another manner however, the entity is required to conduct impairment test for assets individually and disclose the same under the set standards of IAS 36. Moreover, in the same context it needs to be added that the significance of CGU impairment test for providing the essential information to the investors and the financial report analyst for conducting a valuation of the organization in order to undertake investment decision. In case of the Saferide Bus Company the organization has to test the impairment of the routes along with the buses however, the buses operating in the loss zone also needs to assert its impairment as the route is taken by the bus drivers of Saferide Bus Company.  

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AASB 13. (2015, August). Fair Value Measurement. Retrieved from

Andre, P. (2018, June 26). Mandated disclosures under IAS 36 Impairment of Assets and IAS 38 Intangible Assets: value relevance and impact on analysts’ forecasts. Retrieved from

IFRS 13. (2016, October 9). IFRS 13 — Fair Value Measuremen. Retrieved from

Leslie D. Hodder, A. S. (2019, July 23). Fair Value Measurement Discretion and Opportunistic Avoidance of Impairment Loss Recognition. Retrieved from

Stier, C., & Sellhorn, T. (2019). Fair Value Measurement for Long-Lived Operating Assets: Research Evidence. European Accounting Review .

Vincent, ChenaEdmund, & C.KeungbI-MinLina. (2019). Disclosure of Fair Value Measurement in Goodwill Impairment Test and Audit Fees. Journal of Contemporary Accounting & Economics.

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