F3 Impairment

Question 1

Step 1

Answer 1

See if the FV of undiscounted cash flows is less than the carrying value.
If it is test for impairment
If it’s not don’t test for impairment

Question 2

Step 2

Answer 2

Subtract your FV or PV of future cash flows and the difference is the impairment loss

If the FV or PV of future cash flows is
Less then the carrying value there is impairment
More then no impairment

Question 3

Step 3

Answer 3

Subtract your FV or PV of future cash flows and the difference is the impairment loss

Question 4

Step 4

Answer 4

If held for use

1Write down the asset
2Record depreciation
3Restoration of the prior year impairment loss is not permitted

Question 5

Step 5

Answer 5

If held for sale

Add the Cost of disposal to the impairment loss (this will give you a new impairment loss)

1 Wite down asset
2 Do not record depreciation
3Restoration of prior impairment costs is allowed up to the loss that was previously accrued.

Question 6

JE to write down asset

Answer 6

Dr impairment loss
Cr Asset