PPE

Question 1

Held for Sale Assets

Answer 1

To be considered held for sale must meet all the following rules:
1. actively seeking buyer
2. price is reasonable
3. property is immediately available
4. sale expected to happen w/in one year

If ALL these are met, then report asset at the lower of book value or net realizable value. If using NRV then record diff as loss on I/S in the year it is first determined probable, not necessarily when the sale will occur.

Question 2

Impaired value

Answer 2

Only recognize impairment loss if asset cannot generate enough cash flows in the future to cover its current book value.
Ex. If bk val is $66K w/ remaining life of 8 yrs, future cash flows are $9k per year for total of $72K and FMV of asset is $31K, no impairment to record since $72K is greater than $66K. If the future cash flows were less, then you’d write down asset to FMV of $31K and record impairment loss of $35K.