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Assessment of Impairment

In: Business and Management

Submitted By mjmassey1
Words 341
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MEMORANDUM
TO: Engagement Partner
FROM:
Date: September 4, 2013
-------------------------------------------------
Subject: Review and Opinion of Assessment of Opinion (Scenario B)
I my opinion, I agree with Company X classification of its impaired equity securities in Company B as temporary for the December 31, 2010, balance sheet date.
According to the FASB Accounting Codification 320-10-35-33 equity securities are classified as other than temporary in the period in which an entity has decided to sell the securities and the loss on impairment of those securities are to be recorded in the period of the entity’s decision to sale the securities, not the period of the actual sale of the securities. Company X provided written representation to its auditor’s stating it had the intent and ability to hold the securities until there was a recovery in the impairment. Since Company X did not have a definite decision to sell the impaired securities as of the December 31, 2010, balance date the classification of the securities as temporary is supported by this Codification.
On March 15, 2011, Company B informed the public of an up-coming organization restructure that would cause an initial loss of revenue and high initial costs. Following this announcement, Company X sold it securities in Company B for a loss.
I believe the sale of the equity securities would not affect the 2010, financial statements, which were released on March 1, 2011. Since the sale occurred sometime after the release date of the financial statements the sale is a nonrecognized subsequent event that would not require an adjustment to the issued financial statements. However, it is in the auditor’s judgment if the sale needs to be included as an additional disclosure in the issued financial statements.
The 2010, financial statements of Company X correctly account for its impaired equity

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