FAR Intangibles and Impairment

Question 1

How do we treat previously recognized an impairment loss of intangible assets under USGAAP and IFRS

Answer 1

USGAAP: Reversal of Impairment loss is prohibited unless the asset is held for disposal.
IFRS: Reversal is permitted

Question 2

How do you calculate impairment loss of intangible assets with an indefinite life

Answer 2

An intangible asset with an indefinite life is tested for impairment by comparing the fair value of the intangibles with the carrying amount

Question 3

When should a long-lived Asset be tested for recoverability?

Answer 3

Whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

Question 4

Under USGAAP, How do we perform an impairment test on fixed Assets held for use or to be disposed of?

Answer 4

Performance of an impairment test on fixed Assets begins with a recoverability test, in which the sum of the UNDISCOUNTED CF is compared with the carrying amount. If the undiscounted future CF is < carrying amount, an impairment loss would be calculated.

Question 5

Under IFRS, How do we perform an impairment test on fixed Assets held for use or to be disposed of?

Answer 5

Under IFRS, a one-step model is used for FA impairment testing in which the carrying value is compared with the FA’s recoverable amount.

Question 6

Under US GAAP, what are the conditions that must exist for an impairment loss to be recognized

Answer 6

1. Carrying amount is greater than, and not less than its Fair Value, and
2. this carrying amount is not recoverable

Question 7

What is the calculation of impairment loss under USGAAP

Answer 7

1. Compare carrying value (CV) to undiscounted future CF
   If CV < Future CF, an impairment loss must be calculated and recorded.
2. Impairment loss = Carrying amount less FV of Asset

Question 8

What is the calculation of impairment loss under IFRS

Answer 8

Under IFRS, an Impairment loss is the difference between the carrying value and the recoverable amount
Recoverable amount = greater of FV less cost to sell and the Asset’s value in use (ie PV of future CF)

Question 9

What is the impairment test for indefinite intangible FA

Answer 9

When testing indefinite life intangible assets for impairment, FV must be used instead of undiscounted future CF:
FV - Net Carrying Value = + (no impairment)
= - (Impairment)