gaap write down impaired, write, written

former

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

firat

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...



Edited 1 time(s). Last edit at Friday, June 3, 2011 at 03:18PM by passme.

Otabek

b/s will go down by the amount of impairment
I/S will go down by the amount of impairment

I think.....

flyinggirl

yes, it's an income statement charge.

eoin

impairment is an I/S charge

I still can't figure out the inventory impairment under GAAP

hope they don't ask it