Anyone have a good step by step? 1. When is impaired? 2. What is written down to? 3. What happens to b/s and i/s? Thanks
there are 3 things that are related to writedown and impairment. Inventory writedown asset impairment goodwill impairment they all have different rules and they are all different under GAAP and IFRS. Inventory write down: IFRS: compare carrying value of inventory and NRV is FV-selling cost if CV>NRV, write down the inv to NRV GAAP: compare carrying value of inventory and REPlacement cost, rep should be between the range of (NRV-normal profit) and NRV. if CV> REP write down inv to REP Asset impairment: IFRS: compare CV to recoverable amount recoverable amount = higher of (Value in use) or (FV-selling cost) if CV>RA, impairment=CV-RV GAAP: test: compare CV and undiscounted future cashflow if CV> UnDisFCF, then impariment exists. then, CV-PV of future cash flow=impairment goodwill impairment IFRS: compare CV and FV of reporting unit if CV>FV, then goodwill is impaired and should be reduced by this amount. GAAP: compare CV and FV of sub if CV> FV, goodwill is mpaired, then FV of sub - FV of net identifiable asset=actual goodwill, the original goodwill should be write down to this amount. there is some details about “value in use” that i missed. I forgot where to put it…
Where does the loss go for gaap in these 3 scenarios?
b/s will go down by the amount of impairment I/S will go down by the amount of impairment I think…
yes, it’s an income statement charge.
impairment is an I/S charge I still can’t figure out the inventory impairment under GAAP hope they don’t ask it