Impairments

Question 1

What is the formula for impairments?

Answer 1

Step 1: Compare CV vs future Cash Flow (undiscounted)
Step 2: Compare CV vs FV,

Write down CV to FV

Question 2

Impaired long-lived assets to be disposed of by sale that are subject to the reporting requirements of FASB ASC 360-10-35 are measured at

Answer 2

Lower of fair value, less costs to sell or carrying amount, is the proper measurement of an impaired asset held for sale.

Question 3

What is IFRS treatment of impairments?

Answer 3

Under IFRS, the test for and measure of an impairment loss is the excess of carrying value above recoverable amount. The recoverable amount is the higher of the value in use (present value of discounted future cash flows) or net realizable value (sales proceeds less cost to sell).
The recoverable amount here is the value in use of $440,000, which is larger than the net realizable value of $450,000 - $16,000, or $434,000. Thus, a $60,000 impairment loss is recognized.

Question 4

Restorations of carrying value for long-lived assets are permitted if an asset’s fair value increases subsequent to recording an impairment loss for which of the following?

Answer 4

Held for sale/disposal

Question 5

Under IFRS can you recover from an impairment loss?

Answer 5

the impairment loss can be considered recovered and, to the extent of the recovered loss, the impairment can be undone.
However, GAAP cannot be recoverd!!!

Question 6

What is GAAP treatment of impairments?

Answer 6

If the sum of the estimated future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the entity may have to recognize an impairment loss. The impairment loss, if any, to be recognized is any excess of the asset’s carrying amount over its fair value.