Long-lived asset's:
CV = $120,000
UEFCFs = $130,000 (Undiscounted Estimated Future Cash Flows)
PV of EFCFs = $100,000 (Expected Future Cash Flows)
FV Less Costs To Sell = $105,000
Question#1: What is the amount of impairment loss under IFRS?
Question#2: What is the amount of impairment loss under US GAAP?
A. $10,000
B. $20,000
C. $0
D. $15,000
Answer to Q#1 is D=> $15,000 per Becker.
Solution: Impairment Loss = (FV Less CTS) – CV = $105,000 – $120,000 = -$15,000
Explanation: Under IFRS, impairment exists when the CV of a fixed asset exceeds the fixed asset's recoverable amount.
I just added Q#2 as my supplemental query.
Would the answer be C=> $0 since the CV is less than UEFCFs? $120,000 < $130,000? No impairment exists.
P.S.
With IFRS, I got the rule straight in my brain, i.e., to determine if impairment exists, compare CV to RA [Recoverable Amt.]
With US GAAP, that's when my brain cells get more frizzed. Please correct me if I'm wrong.
Under US GAAP, to determine if impairment exists, compare CV to UFCFs [Undiscounted Future Cash Flows]. If impairment exists, accordingly, FV of the asset can be used to determine the amount of the loss to be recognized.
Would it be Impairment Loss = CV – FV only?
Or should it be Impairment Loss = (CV) – (FV Less Costs To Sell)?
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