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Fasb Codifcation

In: Business and Management

Submitted By hoanglink91
Words 881
Pages 4
Linh Hoang
ACCT 322-001
GAAP Research Part I
Professional Research: FASB Codification Chapter 11 a. What is the authoritative guidance for asset impairment? Briefly discuss the scope of the standard (i.e., explain the types of transactions to which the standard applies) The authoritative guidance for asset impairment is to ensure that impairment is recorded and dealt with as depreciation. The scope of the standard is writing off of assets and depreciation. According to the guidance of 360-10-35, it address how long-lived assets that are intended to be held and used in an entity’s business shall be reviewed for impairment. The impairment loss can only be recognized if the carrying amount of a long-lived assets is not recoverable and exceeds its fair value. When the carrying amount exceeds the sum of undiscounted cash flows, it is not recoverable. The assessment is based on the carrying amount at the date it is tested for recoverability, whether in use or under development. Moreover, the amount by which the carrying amount of assets exceeds it fair value is measured as the impairment loss amount. In addition to the test, it also is necessary to review depreciation estimates and methods, since it may address for changes in estimates, including changes in the method of depreciation, amortization, and depletion. When an impairment loss is recognized, the adjusted carrying amount will be the asset’s new cost basis, and will be depreciated or amortized over the remaining useful life of the asset (FASB Codification 360). b. Give several examples of events that would cause an asset to be tested for impairment. Does it appear that Klax should perform an impairment test? Explain. In order to determine if an asset is impaired or not, the accountant should conduct a recoverability test which screens for asset impairment. In the test, if the future cash flows from the

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Premium Essay

Fasb Codifcation

...Professional Research: FASB Codification Chapter 11 a. What is the authoritative guidance for asset impairment? Briefly discuss the scope of the standard (i.e., explain the types of transactions to which the standard applies) The authoritative guidance for asset impairment is to ensure that impairment is recorded and dealt with as depreciation. The scope of the standard is writing off of assets and depreciation. According to the guidance of 360-10-35, it address how long-lived assets that are intended to be held and used in an entity’s business shall be reviewed for impairment. The impairment loss can only be recognized if the carrying amount of a long-lived assets is not recoverable and exceeds its fair value. When the carrying amount exceeds the sum of undiscounted cash flows, it is not recoverable. The assessment is based on the carrying amount at the date it is tested for recoverability, whether in use or under development. Moreover, the amount by which the carrying amount of assets exceeds it fair value is measured as the impairment loss amount. In addition to the test, it also is necessary to review depreciation estimates and methods, since it may address for changes in estimates, including changes in the method of depreciation, amortization, and depletion. When an impairment loss is recognized, the adjusted carrying amount will be the asset’s new cost basis, and will be depreciated or amortized over the remaining useful life of the asset (FASB Codification 360). b. Give...

Words: 334 - Pages: 2