[vodrldnr]

With regard to impaired assets, the FASB standards provide for

<Recognition of loss upon impairment> <Restoration of previously recognized impairment losses>
Yes Yes
Yes No
No Yes
No No

okay.. my understanding is

Loss for impairment is recognized regardless of whether the asset is for use or for sale

asset for use => no recovery
asset for sale => recovery is permitted but only up to its Carrying amount prior to impairment

then based on my understanding I BELIVE the answer is (YES AND YES )

BUT wiley says YES , NO

WHAT THE …????

[vodrldnr]

Substantial Assurance> so it seems like .. impairment on both fixed asset for sale and held for use.

and recovery is only for “for use” ???? it makes us going back to the original problem above …

or are you saying that recovery of impairment loss of asset for use actually means Increase of FMV, not recovery of impairment @_@?

[Substantive Testing]

No, please read my response again. Impairment recovery for fixed assets is only for fixed assets hold for disposal. Let me give you a better picture. The reason why fixed assets for disposal can recover from impairments (which is actually not a good think for companies) is because the person who made this rule does not want companies to record more gain than necessary which is going to make their income statement look better [Sale Price-(Fixed Assets-Impairment)=Gain]. Now, the reason why fixed assets for use does not have impairment recovery is because they are being used, and depreciation will smack fixed assets until they hit bottom anyways, so there is no reason to play around with adjustments. It would also be a nightmare for accountants to be calculating a new depreciation rate every time the fixed assets gets adjusted.

I really hope this helps, if this is making you more confuse, then feel free to disregard this comment.

[vodrldnr]

okay here is my understanding

No Impairment loss for “Fixed Asset” is recovered

However, when fixed asset are held for sale. the fixed asset is reclassified as other asset and no longer belongs to Fixed asset

therefore, we have to consider the fixed asset held for sales (previously fixed asset) as other asset

since the fixed asset is now other asset (not fixed asset), loss on the fixed asset to be disposed of ( again, classification : other asset) can be recovered.

it is not against GAAP : Impairment loss for fixed asset s reversed because the fixed asset is no longer fixed asset when it is classified as other asset.

did I kill it? or not?..

[Substantive Testing]

I wouldnt call it other assets since that account represent goodwill, trademarks and licenses. I am not sure which account would it would be put into, i believe GAAP is a bit flexible on where to put them. But my educated guess is that they are still part of property plant and equipment separate from machinary and called held for sale which doesnt depreciate.

[vodrldnr]

Substantial Assurance> It seems like I am getting it.

so the “Fixed” (or long lived) asset “Held for sale” is separated from JUST “Fixed” Asset(=Long lived asset) held for use. (reclassification occurs here) right ??

and when GAAP says Impairment loss is now allowed for “Fixed Asset”, they only talk about Fixed asset held for use. Not the one for sales because reclassification happens when management plans to sell the Fixed asset. am I right ?

[Substantive Testing]

No..Impairment loss for fixed assets is ALWAYS allowed. As for impairment recovery, recovery is allowed for fixed assets held for sale, but its unallowed for regular fixed assets for use. I suggest you to write it down and let it sink in.

[vodrldnr]

Substantial Assurance> yep I am spending hours and hours to understand it. what really bother me is when GAAP says recovery for impairment loss is not allowed( the law)

I am really confused two contradicting sentences

1. when gaap says recovery of impairment loss is not allowed => okay it is law

2. when text book and you say impairment loss for asset held for sale is allowed => WHAT THE ? the law say impairment loss is not recovered ?

agin

to me this two things are contradict to other.

one : impairment loss is not allowed under gaap
other : impairment loss for long lived asset held for sale is recovered

it like impairment loss is stil “IMPAIRMENT LOSS” to me, then then I am thinking like why they allow recovery of impairment loss for long lived asset is okay providing the law that “GAAP WILL NOT ALLOW RECOVERY OF IMPAIRMENT LOSS”

only way I can understand it the recovery is not the revery for impairment loss but for regular loss due to change of FV.

[vodrldnr]

this is my understanding so far and hope this is correct

when management plans actively look for buyers, not use the fixed asset, and have them prepared/ready for sale. It will be hold for sale; therefore, it does not depreciate,

the long lived asset held for use is named as long live asset held for sale.

when there is indication impairment test should be conducted.

Recognition : Lower of (NRV, BV)
Impairment amount : NRV-BV

Recovery of “Loss” (NOT impairment loss) on fixed asset for sale is allowed

Loss Occurs when BV > NRV and Loss can be revered up to the amount of previous recognition of impairment

it is not the restoration of previously recognized impairment. it is recovery of loss due to the change of FV. therefore, it is not the violation for GAAP : No recovery of impairment loss

[Substantive Testing]

I thought that at first too, but there must be a specific rule for fixed assets held for sale that lets you recover from impairments. And the GAAP rule might be referring to the impairment of fixed assets for use. I also remember that intangibles impairments are not recoverable too, so it really is only fixed assets held for sale that is recoverable.

[vodrldnr]

Hope someday in future, I can get some realization and say eureka

but thank you for your help sincerely.

I think you really have deep underrating in general

[Author]

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