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MKTG5004 Calculation of Impairment of Investment in Subsidiaries Assessment Answer

MKTG5004 Business Research Methods
Research Proposal: 

Assessment Brief


The ability to conduct good research has become a key attribute of successful firms today. Research ensures that firms are able to effectively respond and deal with the ever-changing business environment, both internally and externally.


  • Find a business problem (preferably in your discipline area) that requires research to better understand and solve. 
  • Analyse the problem and develop propositions/hypotheses that need to be examined to address the problem
  • Evaluate a range of research methods and choose the approach that is best suited to the situation and justify your rationale
  • Outline your research process and how this will enable you to answer your propositions/hypotheses
  • Your report should demonstrate the importance of rigorous research and its application to industry


  1. Introduction
    • Define the problem and its scope. You should also include its relevance to industry
    • Describe your research question/s and objectives
  2. Hypotheses/propositions development
    • Describe and justify the relationships that you are looking to test 
    • Apply/incorporate theories to support your hypotheses/propositions.
  3. Research Methodology
    • Justify clearly your overall research strategy to the problem you have identified
    • Describe and justify your sampling frame, procedure, and overall research strategy
    • Describe and justify your data collection methods
    • Propose and justify a reasonable timeline for the research
  4. Contributions 
    • Discuss the potential significance of your research. You will need to discuss it from two perspectives. They are as follows:
  5. Industry perspective – What is real-world significance of your research? i.e. How it will benefit business managers, policy makers etc.?
  6. Academic perspective – How does your research add to or enhance the current body of knowledge of your chosen topic area?


  • Word Count: 2500 +/- 10% (excluding appendices and references)
  • Formatting: Times New Roman/Calibri/Arial, 12pt, 1.5 spacing, Justified
  • References: Chicago referencing ( and using a minimum of 10 academic references. If you are unsure what an academic reference is, please check with your tutor.
  • Other: Where applicable, you are encouraged to use other secondary data sources to support your discussion. Statistics and tables are also welcome but please ensure you explain their relevance


  • Deadline:  Please refer to Blackboard and the unit outline for specific date/time
  • Other:  1 report electronically via TURNITIN on Blackboard




Impairment occurs when a business asset may suffer depreciation in the fair market value. Impairment is the accounting principle, which denotes a permanent reduction in the asset's value of a firm (Gronachan & Lemberger, 2016).  In order to calculate the impairment, cash flow, total benefits, and some other benefits will be compared periodically with the book value of the assets. In order to calculate the impairment loss, all of the factors related to asset impairment will be identified in this study. However, as the issue in the impairment calculation, asset impairment will not be recognized without excellent approximation of the fair market price or value (Huikku, Mouritsen & Silvola, 2017). 

In this study, the researcher will analyze the issues related to the calculation of the impairment of investment in the subsidiaries. In addition, this study will be carried out by considering the current issues of the organizations related to the losses of impairment calculations.   

Research Problem

In the current era of advanced organization, any type of issue related to the calculation of asset value is not acceptable at all. One of the major problems during the impairment calculation is time-consuming (Bull et al. 2018). As for an example of an organization, Wesfarmers is the Australian conglomerate, which has different subsidiaries like Target, Kmart, Core gas, Bakers and many more. The financial department of Wesfarmers has faced this time consumption issue while calculating the impairment assets of the company. The calculation of impairment involves assuming the cash flow, determination of discount rates, identification of impairment indicators and testing reliability of the assumptions in the market. In order to mitigate this issue, the financial department of Wesfarmers needs to start the testing of impairment very early in order to avoid the last minute hurry. 

As evidence Delta electricity is an electricity generation organization of Australia. As per the company report, this organization has faced foreign currency cash flows issues while calculating the impairment of the investment in its subsidiaries.  Some of the common foreign currency cash flow issues are the rate movements of foreign cash, time of receiving the cash flows in foreign currencies and many more. In order to mitigate this issue, the management of Delta electricity can deal with the current cash flows through IAS 36.  

In addition, in context of Delta electricity, another issue that has been found is the external market data issue. Lack of availability of the credit can result in planned investments being lagging back, impacting on the growth perspectives. Therefore, in order to mitigate this issue, financial department of Delta electricity needs to obtain the reports of analysis for most of the market sectors.  These reports need to be considered as proper evidence for supporting the assumptions of the growth.

It is crucially important to pay proper attention to market capitalization (Engel et al. 2018).  Market capitalization below the market value of an asset can be regarded as an explicit trigger for the impairment test. As an instance, the Iconic is the best online footwear and apparel store of Australia. The Iconic has a subsidiary, which is the retailer of trendy women’s wear with a year-end of 31st December.  This group since past few months and is very much concerned about the potential impairment of net assets of C70 m. 

Market capitalization

31st December 2017C80m

31st March 2018C69m

30th June 2018C40m

Therefore, there is the problem that market capitalization has exceeded the carrying value of net assets in the year-end, so there is no need for any type of impairment test.

From the above impairment statement of the Iconic, it is seen that fall within market capitalization values on 31st March 20198 is the indicator of the impairment according to IAS 36. Hence, management of the Iconic needs to perform the impairment test. 

Cash flow in impairment calculation needs to be supportable as well as reasonable. As an example of Telstra, it is one of the largest telecommunication companies in Australia that develops and operates the telecommunication networks. Forecasting of the cash flows before full effects of the economic downtown has not reversed by the financial department of Telstra. Therefore, after forecasting, this company has faced some issue about the validity and the supportability of the cash flows in implement calculation. Therefore, in order to mitigate this issue, greater weight needs to be given to the external evidence. 

Another issue that might arise while calculating the impairment is the estimation of future cash flows in the current condition (Hashim, Li & O’Hanlon, 2016). In the aspect of Telstra, in the practical implication, it has been found that authority is facing some challenges. Forecasts of value in the test are different from the board approved budget of the company. Therefore, in order to mitigate this issue, forecasts need to be adjusted for removing related benefits as well as costs of restructuring. 

Research Scope

In this study, the researcher will analyze the issues and challenges related to the calculation of the impairment in the subsidiaries. Through the aid of this research, global organizations can identify the potential challenges and issues that may interrupt the impairment calculations. In addition, these organizations can determine the strategies in order to mitigate the issues of impairment. The research will provide proper scope to the policy makers and business managers to analyze the issues related to cash flow forecasting in the impairment calculations. 

Research questions

  • What are the issues related to the calculation of impairment of investment in the subsidiaries?
  • What are the issues related to the future cash flow forecasting in the calculation of impairment?
  • What are the challenges regarding market capitalization?
  • What are the recommendations in order to mitigate the issues of impairment calculation?

Research objectives  

  • To identify the issues related to the calculation of impairment of investment  in the subsidiaries
  • To determine the issues related with the future cash flow forecasting in the calculation of impairment
  • To analyze the challenges regarding market capitalization in organizations
  • To provide recommendations in order to mitigate the  issues of impairment calculation


Justifying the relationships for testing

H0: The issues regarding impairment calculation of investment in the subsidiaries cannot be resolved

H1: The issues related to the impairment calculation of investment in subsidiaries can be mitigated by using proper strategies.  

As identified by the H0 analysis, issues, as well as challenges regarding impairment calculations of investment in subsidiaries, cannot be resolved by the organization due to lack of focus.  In addition, as determined from the H1 hypothesis, changes regarding impairment calculation of investment can be mitigated properly by using proper strategies. In this study, the researcher has given focus on the H1. Organizations, that face different types of issues while calculating the impairment, management needs to start the testing of impairment very early in order to avoid the last minute hurry. Apart from this, financial departments need to pay proper attention to market capitalization. These are some strategies which might be used by the companies for avoiding the challenges of subsidiary impairment calculation. 

Incorporating theories for supporting the hypothesis

Discounted Cash flow model

Discounted cash flow model or DCF is the valuation method that estimates the value of the investment in accordance with the future cash flows. According to the discounted cash flow model, the present value of the estimated future cash flow can be found by the usage of a discount rate (Kahn et al. 2015). Therefore, the organizations that might face different types of cash flow issues in the impairment calculations can use this model for resolving the challenges. 

According to a discounted cash flow model, financial departments of companies need to estimate the future cash flows for assets within the current conditions.  The benefits and costs of future restructuring need not be considered in cash flow forecasting unless any related provisions had been made. 

In addition, benefits as well as cash of the future expenditure which is expected to improve the business need to be excluded from forecasting cash flow. 

As per the discounted cash flow model, cash flow forecasts, which have been forecasted several months ago, might be revised (Xu, 2016). In order to avoid the issues, cash flow forecasting must be compared with forecasts of analysts, economic forecasters, and other third-party experts.

Research methodology

In this part, the researcher will frame a suitable methodology in order to carry forward this research effectively. For this, the learner will gather knowledge from several conceptual theories, models and underpinning concepts of the previous chapter.

Research strategy

According to the purposes of research, researcher can choose the best suitable research strategy. Different types of research strategies that are available are interviews, surveys experiments and case studies (Saleh et al. 2015).  In the aspect of the survey, data is collected from huge number of population within a cost-effective manager. Through the aid of interview, enriched information is collected from limited yet knowledgeable persons. Case studies may provide secondary information to research that is collected via relatable case scenarios. On the other hand, experiments provide new models and theories related to the research aim and process reliability as well as the validity of previous researchers.

Justification for choosing an appropriate research strategy

After analyzing different types of research strategies, the researcher will select both of the survey and interviews in order to conduct this study. With the help of the research survey, the researcher will collect original as well as extensive data from the huge number of respondents. In addition to it, interview will be conducted by researchers among the experienced people of the organizations which have faced issues in the calculation of impairment of investment in the subsidiaries.  

For this research study, the researcher will select 100 employees from the organization as the population of the researcher. Among this, 50 employees will be selected by researcher as the sample respondents of this research. The respondents of the survey need to have a minimum of three years of experiences in the related field. This will help learner to collect only reliable as well as authentic data for research purpose.

For interview purpose, researcher will select four managers from two different companies which faced issues in the calculation of impairment of investment in the subsidiaries. The managers of companies need to have a minimum of 6 years of experience in the related field.

Sampling frame

There are generally two types of sampling methods are available which are probability sampling method and non-probability sampling methods. In the aspect of probability sampling method, the researcher selects respondents in a random way. On the other hand, in the scenario of non-probability sampling method, the purposive selection is used in order to choose the respondents of the survey (Walters & D’Aoust, 2015).

Sampling procedure

In this research, researcher will use a probability sampling method in order to conduct the research survey.  Therefore, the researcher will choose the respondents of researches very randomly. However, all of the respondents of researcher need to possess minimum of three years of experiences in the related field.

Data collection methods

Researcher collects the necessary information by usage of fixed methods like primary and the secondary methods.

Primary research

Primary research is the process of collecting information for data directly from a source. In the primary research, data is collected from the people who have enough understanding of the research topic (Walters & D’Aoust, 2015).

Quantitative data collection method

Quantitative data collection method focuses on the objective measurements and the information is collected via questionnaires, polls for surveys. In this research, the researcher will conduct a survey of 50 respondents who have a minimum of three years of experiences.

Qualitative data collection method

There are different methods available for conducting the qualitative data collection method, including textual, visual for observational analysis and the interviews based on group for individual. In this research, researcher will conduct an interview of four managers from two different companies which faced issues in the calculation of impairment of investment in the subsidiaries.

Secondary research

Secondary research method is another type of research method which involves information which others have collected from the primary research. In the secondary research, learner collects data from different journals, reports and newspaper articles. In this study, the researcher will not conduct any type of secondary research in order to carry out this investigation.

Timeline for research

Main activities as well as stagesWeek 1Week 2 to 8Week 8 to 15 Week 15 to 21Week 21 to  24Week 24 to 26Week 27
Selection of research topic

Data collection

Planning the layout

Reviewing the literature

Development of the research planning

Selecting the research techniques

Data analysis

Interpretation of the findings 

Preparation of the conclusion 

Overdraft of project 

Final submission

Table1: Research timeline

(Source: Created by learner)


a.       Industry perspectives

Impairment is the principle that shows the permanent reduction within the value of the asset of a company. Impairment calculation can be done when a large, as well as sudden decline, can be found in fair value of the asset below the carrying amount (Schwarzbichler, Steiner & Turnheim, 2018). However, it has been found that while calculating the impairment of investments in subsidiaries, organizations face different types of issues which opposes the reliability if the impairment calculation. These types of issues include future cash flow forecasting, time consumption of the impairment calculation and foreign currency cash flows issues.

Through the aid of this research, researcher will shed a light on the potential issues of the impairment calculation that can be very time-consuming. In addition, in this study, researcher will identify some strategies that can mitigate the major issues of impairment calculation. Therefore, the companies who cannot manage their cash flow statements or impairment calculations will get an idea about the theories and models of impairment calculation.

Business managers and policymakers do the impairment of assets only when the difference between the carrying amount and the fair value has been deemed to be unrecoverable (Gurkov & Saidov, 2017). According to the generally accepted accounting principles for GAAP, all of the assets have been considered as impaired when fair values fall below book values.

Therefore, the policymakers will get an idea about the GAAP accounting principles through this research.  Apart from this, it can be said that any write off regarding impairment loss might have negative impacts on the balance sheets and resulting financial ratio. Hence, it is important for organizations to test every fixed asset for the impairment periodically (Chen, Lee & Zeng, 2014). The standard level of GAAP practice tests the assets for the impairment at the lowest level.  

Through the help of this research study, the policymakers can get a proper idea of what strategy is best suitable for mitigating the time consumption issues of the impairment calculation.

b.      Academic perspective

This research investigation will not produce diversified and descriptive result because of the money, scope and scope limitations. Hence, future researchers will get adequate chances in order to extend the findings of research based on the observation of the research proposal.

Through the help of this research proposal, the researcher will perform a dissertation based on the findings and data of the proposal.  Therefore, this research proposal will serve as the secondary basis of the information.

In this study, researcher will provide some excellent strategies that can be used by the organizations in order to mitigate the issues of calculation of impairment of assets.

Learner, who will conduct this research, will get enough knowledge about the financial accountancy that can further help the researcher in future career life. 

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