Impairment of Long-Lived Assets
Recognizing Losses in Asset Value
Long-lived assets, including PP&E and finite-life intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If impaired, the asset is written down and an impairment loss is recognized.
- Test when impairment indicators exist.
- Compare carrying amount with recoverable amount under applicable guidance.
- Recognize impairment loss if required.
- Reduced carrying amount becomes the new accounting basis.
Note
Impairment accounting prevents assets from being reported above the benefits expected to be recovered from their use or disposal.
Summary
Impairment ensures long-lived assets are not carried at amounts exceeding their recoverable economic benefits.