Impairment of Assets: Tests, Indications, and Allocation
Classified in Economy
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Impairment of Assets
Impairment test for inventories is carried out by: comparing the car.am. of each item of inventory with its net selling price.
Impairment test for assets other than inventories is carried out by: comparing the carrying amount of each item of other assets (or group of similar items) with its recoverable amount.
If there is an indication that an asset may be impaired, this may indicate that the entity should review: the remaining useful life of such asset.
If asset’s fair value less costs to sell and its value in use exceed asset’s carrying amount, then: such asset is not impaired.
Impairment loss shall be allocated to reduce the carrying amount of the assets of the unit in the following order:
first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then, to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the cash-generating unit.