Page 31 - FINAL CFA I SLIDES JUNE 2019 DAY 8
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Session Unit 8:
29. Long-lived Assets
LOS 29.i: Explain the impairment of property, plant,
and equipment and intangible assets, p.223
IFRS US GAAP (less strict?)
• Annually assess assets for impairments and if • Impairment testing done not annually, but
impaired (CV > Recoverable Amount); write only when events and circumstances indicate
down loss to income statement! the firm may not be able to recover the
carrying value through future use:
tanties
Recoverable amount is the greater of its FV
less any selling costs and its value in use – Step 1 apply recoverability test and if
being the present value of its future cash impaired, test 2 –measure the loss!
flows stream from continued use.
• Asset considered impaired (and hence written
• Any impairment loss can be reversed if a
subsequent review confirms value has recovered down into the income statement) if the
but the loss reversal cannot cause the value to CV > than its future undiscounted cash flows:
exceed its carrying value before the impairment
loss was recognised. use undiscounted to ensure increases in
interest rates do not cause ‘impairments.’
