[donnychristal]

I thought when impairment loss happens, it will debit accumulated depreciation. But one question on becker actually tells me that ‘ impairment loss is credited to accumulated depreciation. in addition, current year’s depreciation expense should be added’ I am just confused…it will be awesome if anyone can show me the journal entries.

FAR - 75
AUD - 64/71
BEC - 85

[Anonymous]

An impairment loss will bring the book value of the asset to zero at the day of the impairment. So instead of doing depreciation each year, the impairment loss is effectively fully depreciating the asset in that year. Therefore the journal entry would be the same as it would be if you were recording depreciation against that asset:

DR depreciation expense (or impairment loss, if available)

CR Accumulated depreciation

[donnychristal]

there's a journal entry in the book

DR Accumulated depreciation

DR Loss due to impairment

CR Asset at full value

then what's this for??

FAR - 75
AUD - 64/71
BEC - 85

[Missy]

The first scenario you posted is if the impairment loss does not bring the carrying value to zero. Say you bought an asset for 100k and already depreciated 20k. Your carrying value is 80k but you find the asset is only worth 70k, so you have a 10k impairment loss which will debit depreciation expense and credit accumulated depreciation. The second scenario is a disposal where the asset is being written off entirely and removed from the books.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Missy]

Also in the second scenario you are debiting all of the accumulated depreciation that has been booked since the asset was capitalized, to effectively zero it out.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Author]

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