Case: Online Gaming Chester Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Case: Online Gaming Chester Case Solution

Evaluate the need of impairment testing in the current year, including calculations if appropriate.

IAS 36 paragraph 12 states that the company should apply impairment testing when the external indications are happens and become visible that means external indications mainly include the negative changes in the economy and laws and regulations. (Summary, IAS 36 Impairment of Assets, 2014)

In the case it is acknowledged that the industry in which company operates is a high technologically advanced industry and the volatility and variations in the industry is also very high so it is a clear indication for the testing of impairment because the assets held by the company might not generate the expected return in future.

The share decrease in market values also an indication for impairment testing as determined in the IAS 36, this is a serious issue when stock market is volatile and the share of companies significantly losing its values. Thus the company has to test its asset base for impairment.

A part from external indications the company has internal indications as well for the impairment of assets. As the current year financial results shows that the company performance is below expectations therefore the company has to check its asset base and confirmed that cash flow projection are accurate.

Identify the accounting policy that should be chosen to present revenue as gross number or net of financing costs in the coming financial year when face book credit agreement become active.

The accounting policy should be chosen by the company should base on the basic rule that determines that the revenue should be measure on fair value received or receivable.

The company should carry out the revenue recognition policy based on the guidance provided by the IAS 18. The standard states that the company should only recognize the revenue when the risk and reward associated with the goods are transferred to the other party.

In case of Chester games the revenue from the consumable item is recognized on the basis of as when transferred to the players this policy is consistent with the IAS 18 as it state that revenue recognize by the company when the company reliably measure its amount.

The revenue from durable items is recognized on the basis of average life of the player it is a correct treatment however the company recognize the revenue when the cash is received it is not the correct treatment. The company should treat the upfront cash as an unearned income on the balance sheet and recognize the revenue gradually...................

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