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Section 3240: Impairment of Long-lived Assets
[U.S. GAAP Codification Topic]
360-10-35
[U.S. GAAP before the Codification]
SFAS 15, June 1977, Accounting by Debtors and Creditors for Troubled Debt Restructurings
SFAS 114, May 1993, Accounting for Creditors for Impairment of a Loan, an amendment of FASB Statements No. 5 and 15
SFAS 144, August 2001, Accounting for the Impairment or Disposal of Long-Lived Assets
1. Initial measurement of property, plant and equipment
(1) Measured at cost
(2) Cost includes (2a)
(2a) all costs necessary to make the asset ready for intended use
(3) During the construction period
--> certain interest costs are also capitalized
2. Subsequent measurement of property, plant and equipment
(1) Depreciation
(2) Impairment of long-lived assets
(3) Disposal of long-lived assets
3. Classification of long-lived assets
(1) Long-lived assets held for sale
(2) Long-lived assets to be held and used
4. Long-lived assets "held for sale"
(1) Presented separately in the statement of financial position
(2) An asset is not depreciated while classified as "held for sale"
(3) Measured at the lower of (B) and (C)
(B) carrying amount
(C) fair value less cost to sell
(4) Newly acquired long-lived assets held for sale
--> measured at fair value less cost to sell, at the acquisition date
(5) If (C) < (B)
--> a loss is recognized
(6) If (B) > (C)
--> a gain is recognized up to "the cumulative loss" previously recognized
(7) A gain or loss
--> adjusts the carrying amount of the asset
5. Discontinued operations
The results of operations of (5a) and (5b) are
--> reported separately as discontinued operations
(5a) component that has been disposed of
(5b) component that is classified as "held for sale"
6. Long-lived assets to be 'held and used" are
--> tested for impairment
7. Impairment test
(1) Step 1: Test for recoverability
--> when there is an indication that carrying amount may not be recoverable
(2) Step 2: Measurement of impairment loss
--> if Step 1 shows that carrying amount is not recoverable
8. Recoverability test
Carrying amount is not recoverable
--> if (D) < (B)
(B) carrying amount
(D) sum of "undiscounted" cash flows from the asset
9. Impairment loss
(1) An asset is impaired when (E) < (B)
(2) Impairment loss = (B) - (E)
(B) carrying amount
(E) fair value
10. Impairment loss is not reversed
(1) If an impairment loss is recognized
--> adjusted carrying amount becomes "new cost basis"
(2) Impairment loss is "not" reversed
--> when there is a subsequent increase in fair value
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