ACCTG 101 Lecture Notes - Lecture 31: Impaired Asset, Book Value, Capital Asset
Document Summary
Impairment occurs when the carrying amount of the long-lived asset (such as. Pp&e) is greater than its future economic benefit to the company. Management needs to regularly evaluate assets for any indicators of impairment. Ifrs requires this at the end of each reporting period. Aspe only when there is an indicator of impairment. If there is an indicator of possible impairment, then the asset must be tested for impairment. Two main approaches to measuring impairment losses are: An asset is impaired only if carrying amount cannot be recovered from using and eventually disposing of the asset. Done through a recoverability test i. e. impaired if carrying amount > undiscounted future net cash flows less costs of disposal. Fair value of the asset is best measured by quoted market prices in active markets. It is by its nature a present value or discounted measure. Impairment loss = carrying value - fair value. Can also credit the capital asset account itself or.
