Rough Waters Ahead Essay

What impact should the potential foreclosure and extinguishment of debt have on the cash flows used to perform the recoverability test?

• What impact should the potential foreclosure and extinguishment of debt have on the cash flows used to perform the recoverability test?

of CGUs) and then to the other assets in the CGU (or groups of CGUs) pro-rata on the basis of the carrying amount of each asset in the CGU (or groups of CGUs). An impairment loss recognised for goodwill is recognised immediately in profit or

According to ASC 410-20-25-10, instances may occur in which insufficient information to estimate the fair value of an asset retirement obligation is available. For example, if an asset has an indeterminate useful life, sufficient information to estimate a range of potential settlement dates for the obligation might not be available. In such cases, the liability would be initially recognized in the period in which sufficient information exists to estimate a range of

Where explain the concept of Intangible asset, which represents assets that absence of physical substance. Moreover, Goodwill represents an asset from which is expected future economic benefits, emerge from the acquisition of other assets or business combination. Another important point would be the impartments testing as refers ASC 350-20-35-28 where indicates that Goodwill of reporting unit must be tested for impairment annually. The test can be accomplished at any time in the fiscal year. In the case of different reporting unit, the impairment test could be at different times. This citation in the memorandum was provided incorrect (ASC 305-20-35-1 and 28) this encoding does not exist in FASB.

The value of fixed assets typically decreases over time. The amount of the decrease each year is accounted for and is called depreciation. Depreciation for the year is expensed on the income statement and added to the accumulated depreciation account on the balance sheet. So the value of the fixed assets on the balance sheet is reduced by the accumulated depreciation.

Section 360-10-35-17 of the Code states that an impairment loss shall be recognized if the carrying value of a fixed asset is not recoverable and exceeds its fair value. The carrying value of the fixed asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and disposal of the asset. An impairment loss shall be measured by the amount by which the carrying value exceeds the fair value.

* Test for recoverability — If indicators are present, perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the asset (group) in question to their carrying amounts (as a reminder, entities cannot record an impairment for a held and used asset unless the asset first fails this recoverability test).

ASC 320-10-35-35: “In periods after the recognition of an other-than-temporary impairment loss for debt securities, an entity shall account for the other-than-temporarily impaired debt security as if the debt security had

The fair value of neither the asset(s) received nor the asset(s) relinquished is determinable within reasonable limits.

IAS 36-2 states the Impairment of Assets rule shall be applied in accounting for the impairment of all

In accordance with the ASC 360-10-35-21, several changes should be evaluated in testing for the recoverability of long-lived assets: decline in market value, adverse changes in way asset is used or physical change in asset, adverse changes in legal factors or business climate, accumulated costs in excess of the original expected acquisition or construction price, current period losses with history of operating or cash flow losses associated with asset, and sales or disposal before the end of useful life.

Although LOI contends that it will not have to settle the actual retirement obligation, the transfer of the obligation to the future buyer represents a form of settlement. The guidance in ASC 410-20-25-5 requiring the recognition of both an asset retirement cost and asset retirement obligation upon acquisition of an asset with an asset retirement obligation indicates that the transfer of the obligation to another party represents an effective settlement of the obligation by the seller.

According to Section 360-10-35-21, examples of events that would cause an asset to be tested for impairment include a significant decrease in the market price of a long-lived asset, or a asset group, a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition, a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, or asset group, and a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group.

If these estimated undiscounted future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s carrying value over its estimated fair value.