Impairment

Question 1

What is the factor to tell that an entity may need to recognize an impairment loss?

Answer 1

If the sum of the estimated future cash flows (undiscounted) is less than the carrying amount of the asset.

Question 2

What is an impairment loss?

Answer 2

Any excess of the asset carrying amount over its fair value.

Question 3

If the estimated future cash flows (undiscounted) are less than the carrying amount of the asset but not impairment loss needs to be recognized, why would that occur?

Answer 3

The estimated future cash flows are not less than the carrying amount of the asset.

This is even if they carrying amount exceeds the fair value.

Question 4

What is the first step in determining the process of an impairment loss of an asset?

Answer 4

If the carrying amount is greater than the fair value of the asset.

If yes, evaluate if the undiscounted future cash flows is more than the asset carrying value.