Chapter 12 Flashcards
1
Q
Impairment Definition
A
When assets total future cash generating ability falls below its carrying value
2
Q
6 Impairment Indicators
A
- Decrease in market price of long-lived asset
- Adverse change in way long-lived asset is being used or to its physical condition
- Adverse change in legal factors or business climate that could affect value of long-lived asset
- Accumulation of costs in significant excess of originally expected amount for acquisition or construction of long-lived asset
- Current period operating or cash flow loss combined with a history or projection of continued losses
- Expectation that a long-lived asset will be sold or disposed of significantly before the end of its previously estimated useful life. Likelihood more than 50%
3
Q
PPE and Finite-Life Intangible Asset Impairment Test Steps
A
- Are there impairment indicators? If yes then continue
- Determine Carrying Value of Asset and determine if it is over Future Cash Flows. If yes then continue
- Determine if Carrying Value of Asset is over Fair Value of Asset. If so then determine impairment loss (CV-FV) and do journal entry.
4
Q
Impairment Loss Journal Entry:
A
Debit Imp Loss
Debit Accu Dep
Credit Asset
5
Q
Does GAAP permit reversals of write downs?
A
No
6
Q
Indefinite-Life Intangible Asset Impairment Test Steps
A
- Do annual qualitative factor check if part of policy
- If necessary determine if CV of asset is over FV of asset. If so determine Imp Loss and do journal entry
7
Q
Goodwill Impairment Test Steps
A
- Do annual qualitative factor check if part of policy (can stop here potentially)
- If not stopping then check if Carrying Value of Reporting Unit Goodwill is more than Fair Value of Reporting Unit Goodwill. If so then record Impairment Loss
