why ??? I am wrong ??? impairment loss ..

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  • #847040
    vodrldnr
    Participant

    With regard to impaired assets, the FASB standards provide for

    <Recognition of loss upon impairment> <Restoration of previously recognized impairment losses>
    Yes Yes
    Yes No
    No Yes
    No No

    okay.. my understanding is

    Loss for impairment is recognized regardless of whether the asset is for use or for sale

    asset for use => no recovery
    asset for sale => recovery is permitted but only up to its Carrying amount prior to impairment

    then based on my understanding I BELIVE the answer is (YES AND YES )

    BUT wiley says YES , NO

    WHAT THE …????

    It ain't About How Hard You Hit
Viewing 15 replies - 1 through 15 (of 25 total)
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  • #847050
    Substantive Testing
    Participant

    FASB follows GAAP, and GAAP does not allow recovery of impairments. If something is written down, it is left as it is, and it is not written back up, even if it was an error. You cannot really mess up with impairments. But as for IFRS, they allow impairment recovery. I believe you are confusing those 2.

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    #847152
    vodrldnr
    Participant

    Substantial Assurance> I think gaap does not allow recovery of impairment loss for asset for use. but it allow recovery of impairment for asset for sale…

    It ain't About How Hard You Hit
    #847176
    Substantive Testing
    Participant

    Double check on that, I am pretty sure GAAP does not allow recovery of impairments even if they are for sale. Here is a little nice chart.
    https://www.iasplus.com/en-us/standards/ifrs-usgaap/impairment-of-assets

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    #847209
    Anonymous
    Inactive

    Perhaps what's confusing you is differences between “impairment” and “adjusting to market value”? Like when you're holding stocks for sale, you adjust them to market value, up or down either way, but that's different from if something suffers impairment.

    #847248
    vodrldnr
    Participant

    Substantial Assurance> clearly, you are right .. but my text book says asset for sale, the impairment is recoverable up to its book value prior to impairment …

    like lila says I am confused with adjusting to market value ???

    wiley on page 283..

    a. it says Fixed assets intended for disposal are not subsequently depreciated. the equipment to be disposed of would be classified as other asset on the B/S

    b. Loss on the fixed asset to be disposed of can be removed due to changes in the fair value of selling cost associated with the asset. this write up however cannot exceed the carrying amount prior to recognition of impairment.

    the reason why impairment of asset for sale is recoverable is because of “b”

    am I misunderstanding it ?

    Like lilla mentioned.. is it just one that related Fair market value adjustment, not impairment loss ???

    It ain't About How Hard You Hit
    #847281
    Substantive Testing
    Participant

    Are you using the same wording as Wiley book? If so, then I think Wiley is being a bit misleading unless they are talking about IFRS. “Under no circumstances is it allowable to reverse an impairment loss under GAAP.”

    https://www.accountingtools.com/impairment-loss-accounting

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    #847302
    vodrldnr
    Participant

    Substantial Assurance>

    I just copied and paste the sentences from wiley. No changes to original wording.

    when wiley says “This write up however cannot exceed the carrying amount prior to recognition of impairment”, it made me so confused.

    I am sure I did not messed it up with IFRS since wiley always put IFRS at the end of chapter separately from GAAP.

    it seems like you are totally right. no impairment recovery allowed under gaap.

    also it seems like the wording ” prior to recognition of impairment” just refers to just loss due to FV changes…

    sometimes wording itself from Wiley or my text book is soo confusing

    It ain't About How Hard You Hit
    #847352
    Operation_CPA
    Participant

    Literally was thinking this the other day. In my Becker MCQ's it has this question:

    Under U.S. GAAP, restorations of carrying value for long-lived assets are permitted if an asset's fair value increases subsequent to recording an impairment loss for which of the following?

    Held for use = No
    Held for disposal = Yes

    Under U.S. GAAP, long-lived assets that are impaired can only have their carrying value restored if they are held for disposal. Assets that are held for continued use that are impaired are not permitted to have any restoration of carrying value. Keep in mind that any write-ups are limited to previous write-downs.

    Then I got this one:

    Last year, Katt Co. reduced the carrying amount of its long-lived assets used in operations from $120,000 to $100,000, in connection with its annual impairment review. During the current year, Katt determined that the fair value of the same assets had increased to $130,000. What amount should Katt record as restoration of previously recognized impairment loss in the current year's financial statements under U.S. GAAP?

    Answer = 0

    There will be no amount recorded because a subsequent reversal of an impairment loss is prohibited under U.S. GAAP.

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    Truly I tell you, if you have faith as small as a mustard seed, you can say to this mountain, "Move from here to there," and it will move. Nothing will be impossible for you.

    #847601
    vodrldnr
    Participant

    @Operation_CPA, oh .. that makes me confused again…

    so far, My understanding is Under Gaap => No recovery of impairment

    but when it comes to sales, the impairment is not the impairment that you think of.

    it is rather FV adjustment than impairment.

    but then,,,

    your question … lol

    It ain't About How Hard You Hit
    #847631
    vodrldnr
    Participant

    ASC 360-10-35-40 says

    Loss is recognized and gain is also recognized but only up to the cumulative loss previously recognized

    okay now what is wrong ?????what is going on here ???

    okay is it just the problem about different term ?

    is it something like .. impairment loss and just “loss” is not the same thing ?

    as Lilla mentioned above .. am I mistakenly comparing Impairment with FV adjustment ?

    It ain't About How Hard You Hit
    #847635
    vodrldnr
    Participant

    but in this question

    Under U.S. GAAP, restorations of carrying value for long-lived assets are permitted if an asset’s fair value increases subsequent to recording an impairment loss for which of the following?

    Held for use = No
    Held for disposal = Yes

    why are they using “Impairment” ???? isn't it just loss, NOT impairment ????

    then

    on the other question, Under gaap impairment loss is not permitted ??? are you kidding me??????????????

    It ain't About How Hard You Hit
    #848013
    Operation_CPA
    Participant

    Bump. Can someone try and explain this?

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    Truly I tell you, if you have faith as small as a mustard seed, you can say to this mountain, "Move from here to there," and it will move. Nothing will be impossible for you.

    #848042
    Substantive Testing
    Participant

    From my point of view, gains and losses while holding the asset are for investments since companies have to reevaluate them at fair value. You do not recognize a gain or loss for fixed assets unless you sell the fixed asset. Now, moving on to fixed assets held for disposals, in order to be classified as disposal, from what I remember, you have to actively look for buyers, not use the fixed asset, and have them prepared/ready for sale. It will be hold for sale; therefore, it does not depreciate, but it has to be adjusted according to fair market value, but because its nature of the beast is “fixed assets” the adjustment is called impairment, and it can be adjusted up and down.

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    #848064
    vodrldnr
    Participant

    @Substantial assurance,

    its nature of the beast is “fixed assets” the adjustment is called impairment, and it can be adjusted up and down. => so this means that I can consider impairment of asset for sales as loss due to the change of FV ?

    It ain't About How Hard You Hit
    #848081
    Substantive Testing
    Participant

    Be careful when you say assets. We are talking about Fixed Assets here. Yes, fixed assets are subject for impairments and that is when the FMV went down (and lower than carrying value), and you do not think it is going to back up, then you impair it. But if later on after some time, maybe a year or more, thanks to god blessing or art of black magic the FMV of the fixed asset went up, you can only write it back up if they are hold for disposal.

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