FAR 3B - Contingencies

Question 1

When must an entity review long-lived assets for impairment?

Answer 1

🔍 Trigger:

An entity must review long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
🚩 Examples of Triggering Events:
📉 Decrease in market value
⚠️ Adverse business or legal changes
💸 Operating or cash flow losses
🔄 Projection of ongoing losses

💡 Impairment Test:
Compare the carrying amount with the undiscounted future cash flows.
If the carrying amount exceeds the cash flows, recognize an impairment loss.