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4 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Overview
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-Carrying amounts of fixed assets held for use and to be disposed of need to be reviewed at least annually
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or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable
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Test for Recoverability- GAAP
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-When a fixed asset is tested for impairment, the future cash flows expected to result from the use of the asset and its eventual disposition needs to be estimated.
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-If the sum of undiscounted expected (future) cash flows is less than the carrying amount, an impairment loss needs to be recognized.
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Reporting the Impairment Loss
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-Reported as a component of income from continuing operations before income taxes.
-Not extraordinary. -Carrying amount of the asset is reduced. |
-Restoration of previously recognized impairment losses is prohibited.
-Total loss goes on the I/S -Write-down of carrying value goes on the B/S |
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Calculation of Impairment Loss- IFRS
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-Calculated using a one-step model in which the carrying value of the fixed asset is compared to the fixed asset's recoverable amount.
-IFRS allows the reversal of impairment losses |
-Recoverable amount is defined as the greater of the asset's FV less costs to sell and the asset's value in use.
-Value in use is the PV of the future cash flows (discounted) expected from the fixed asset. |
