F3 - M8 - Impairment Flashcards
Intangible Assets other than Goodwill
Indefinite Useful Life - Atleast ANNUAL; Triggering events bad things
-test impairment by comparing FV to its carrying amount
Finite useful life are tested whenever events or changes in circumstances; 2 step impairment test
- Step 1 Recoverability test, carrying amount compared to sum of the undiscounted cash; Determining the impairment, use undiscounted future net cash flows
- Step 2, Discounted cash flows, carrying amount exceeds total undiscounted future cash flows; amount of impairment, use FV or discounted cash flows
Reporting Impairment Loss
US GAAP - Continuing operations, component of income from continuing operations
US GAAP
Finite Life
- Useful life is limited
- Amortize over economic life
- Impairment test, two step; Undiscounted net cash flows and fair value
Indefinite Life
- Life extends beyond foreseeable future
- No amortization
- One step; fair value
Intangible Assets - Undiscounted future net cash flows
Positive = No impairment loss
Negative = Impairment
- Assets Held for use; FV - CV = Impairment Loss
- Write down asset, 2 amortize new cost, 3 Restoration not permitted
- Assets held for disposal; FV - CV + Disposal cost = IL
- Write asset down, 2 No amortization, 3 Restoration permitted
Impairment of PP&E
Atleast ANNUAL; Triggering events bad things
Test for recoverability
Impairment of PP&E - Undiscounted future net cash flows
Positive = No impairment loss
Negative = Impairment
- Assets Held for use; FV or PV future net cash flows - Net CV; 1. Write down asset, 2 Depr new cost, 3 Restoration not permitted
- Assets held for disposal; FV or PV future net cash flows - Net CV + Cost of disposal; 1. Write asset down, 2 No depr, 3 Restoration permitted
Impairment Testing
Step 0 - Qualitative Test for impairment on indefinite life intangibles
Step 1 - Undiscounted future net cash flows (net carrying value); positive = no impairment loss; negative = impairment
Step 2 - - Assets Held for use or Assets held for disposal calculations
