[fredyoungchen]

I am really confused here…some questions I encountered seems contradicting with each other

I have looked through many post on this. Here is what I got of a general rule:
1. Official Document: According to ASC 360-10-35-20 under U.S. GAAP, because an asset is considered to have a new cost basis after an impairment loss is recorded, the reversal (or “restoration”) of a previously recognized impairment loss is prohibited. <https://www.iasplus.com/en-us/standards/ifrs-usgaap/impairment-of-assets
2. Willey: Losses on fixed assets to be disposed of can be recovered due to changes in the fair value or selling costs associated with the asset.
Recoveries of previously recognized impairment losses may not be recognized in subsequent periods.
https://www.another71.com/cpa-exam-forum/topic/loss-on-asset-impairment-question/

While the questions I met:
1. Ninja: Restorations of carrying value for long-lived assets are permitted if an asset’s fair value increases subsequent to recording an impairment loss for which of the following?

A.
Both held for use and held for disposal

B.
Held for use

C. Correct
Held for disposal

D.
Neither held for use nor held for disposal

2. Willey
<Recognition of loss upon impairment> <Restoration of previously recognized impairment losses>
Yes Yes
Yes No correct
No Yes
No No

The only reason I can think of for Willy’s concepts is that some time the loss is not recognized as impairment but as a valuation allowance to OCI. In this sense loss can be reversed when for disposal but impairment can’t. If this is true, my biggest concern is that in the exam, when I saw question 1 what should I choose since it clearly states that it is impairment.

Thanks guys!

[Missy]

I think the difference is between GAAP and IFRS.

https://www.iasplus.com/en-us/standards/ifrs-usgaap/impairment-of-assets

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

[Mike J]

Question to clarify. For the NINJA question, are restorations of previous year's impairment loss allowed for assets held for disposal because such assets need to reflect the current market values; they're expected to be (re)sold unlike those held to maturity?

I only ask to find connective tissue among the various Accounting treatments. It reminds me of Trading & Available for Sale Securities vs Held to Maturity. The latter case, you didn't have to make FV adjustments, just make the amortization table.

[CPAIN2K17]

Under IFRS, you can write an impaired assets value back up (limited only to the amount of impairment that you took). Under GAAP, you can only write an assets value back up if it's held for disposal.

[fredyoungchen]

Hi mla11692,

Yes, in IFRS, impairment can be recovered. However, in many sources, GAAP also allow impairment recovery for held for disposal assets.

[fredyoungchen]

Hi Mike030882,

You are right about the NInjia Question. Thank you! I now understand why held for disposal assets can recover from impairment. However, my biggest concern now is in the exam when asked whether impairment recovery is allowed or not, how should I answer? Clearly, from the 2 questions above, one said no recovery is allowed, the other said it is allowed when for held for disposal/sale assets. Form the information gathered, can we say that the question 2 from Willy is wrong?

[fredyoungchen]

HI CPAIN2K17,

Thank you for your help. So basically, when asked whether impairment recovery is allowed or not, I should answer yes. And the question from Willy I posted is wrong and the statement from willy that “Recoveries of previously recognized impairment losses may not be recognized in subsequent period” is also wrong?

Also, in GAAP, when you say write an assets value back up, does that mean asset impairment recovery? Or there is any difference? I checked the link here again (<https://www.iasplus.com/en-us/standards/ifrs-usgaap/impairment-of-assets). It did not say anything about the exception to the rule of ” the reversal (or “restoration”) of a previously recognized impairment loss is prohibited.” However, I do know that impairment recovery is allowed for held for disposal assets. It is just driving me crazy.

[Author]

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