ACCTG 101 Lecture Notes - Lecture 25: Effective Interest Rate, Book Value, Cash Flow
Document Summary
Reviewed for possible impairment to ensure that future benefit justifies the valuation on the balance sheet. Usually just used for cost/amortized cost models. Both ifrs and aspe requires adjustments for impairment at least at each reporting date. Impairment test carried out only if there is evidence of possible impairment, such as: Impairment loss is recognized in net income as difference between carrying amount and revised present value of expected cash flows. Or difference between amount realized if asset were sold or amount realized if entity called the loan and took any collateral. Revised present value is calculated using discounted cash flow (dcf) model (using either historic or current market rate as discount rate) Example of journal entry at year end where firm follows aspe: Impairment loss is recognized in net income as difference between carrying amount and revised present value of expected cash flow.
