the IFRS and GAAP differ on the impairment test for long-lived assets, can you show a...

the IFRS and GAAP differ on the impairment test for long-lived assets, can you show a numerical example on how a change from GAAP will occur to IFRS with regards to this specific matter?

Expert Solution

Under GAAP, long term assets are value at historical cost i.e., purchase price minus accumulated depreciation. Under IFRS, long term assets can be value at historical cost or fair market value. Under GAAP the value of the asset can only be decreased by charging depreciation or loss but under IFRS the value of the asset can be increased considering the fair market value. So under GAAP, impairment of asset is charged to profit and cannot be taken back. But under IFRS, if the asset's fair market value increases, you can take back the amount of the impairment.

Example, let us assume a fixed asset cost be $25,000 and one of its part worth $300 is damaged. So under GAAP, $300 will be charged to profit as an expense or loss of asset and the value of the asset is decreased to $24,700. If later it is found that the damaged was false then we cannot reverse the entry to correct the value of the asset as it is charged to profit. But incase of IFRS this reverse amount can be adjusted or added while valuing the asset at fair market value. So if you change from GAAP to IFRS, you can correct the value of the asset by adding back the false impairment loss while valuing the asset.

ekkarill92 answered 1 year ago

When should long-lived assets be measured for impairment using the Recoverability test? Quarterly Semi-annually Annually When...

When should long-lived assets be measured for impairment using the Recoverability test? Quarterly Semi-annually Annually When circumstances change indicating a carrying amount may not be recoverable None of the above To perform a Recoverability test for long-lived assets, the asset’s carrying amount is compared to The sum of the expected future net cash flows (discounted) from the use of that asset and its disposition The sum of the expected future net cash flows (undiscounted) from the use of that asset...

Both US GAAP and IFRS require that property, plant and equipment and finite-lived intangible assets be...

Both US GAAP and IFRS require that property, plant and equipment and finite-lived intangible assets be impaired under certain circumstances. As a general statement, these assets are impaired when their “value” is lower than their carrying value. While the general understanding of impairment is simple enough, it is much less clear how a company should determine whether a given long-lived asset is impaired. Read the relevant portions of the BC in SFAS No. 144 (paragraph B15), SFAS No. 121 (paragraphs...

Obtain the relevant authoritative literature on the impairment or disposal of long-lived assets using the FASB...

Obtain the relevant authoritative literature on the impairment or disposal of long-lived assets using the FASB Accounting Standards Codification at the FASB website (www.fasb.org). Indicate the Codification topic number that provides guidance on accounting for the impairment of long-lived assets.

According to Asset Valuation principle, in IFRS how the long lived assets are valued at the...

According to Asset Valuation principle, in IFRS how the long lived assets are valued at the acquisition and throughout its life? Explain with two examples.

What do you understand by impairment of long-lived tangible asset?

Explain how a company might use the accounting rules for impairment of long-lived assets to manage...

Explain how a company might use the accounting rules for impairment of long-lived assets to manage earnings. Write a short paragraph to answer the question

Under U.S. GAAP, long-lived assets, such as real estate are reported on the balance sheet at...

Under U.S. GAAP, long-lived assets, such as real estate are reported on the balance sheet at the original purchase price of the asset. In the event that the value of a real estate becomes “impaired”—that is, the current market value of the real estate falls below its original purchase price and is unlikely to recover the lost value in the foreseeable future—the asset’s book value is written down to the lower current value and a loss is recorded on the...

What is impairment? Discuss how to determine when long-lived asset impairment exists (i.e. tangible and intangible)....

What is impairment? Discuss how to determine when long-lived asset impairment exists (i.e. tangible and intangible). Give specific examples of assets that are regularly tested for impairment. What is the journal entry when it has been determined that an asset has been impaired.

IFRS and U.S. GAAP for hedge accounting differ on which of the following points? A. U.S....

IFRS and U.S. GAAP for hedge accounting differ on which of the following points? A. U.S. GAAP requires changes in the value of all speculative hedges to be reported in income, while IFRS allows speculative hedge gains and losses to be reported in other comprehensive income. B. U.S. GAAP requires changes in the value of cash flow hedges to be reclassified from other comprehensive income when the hedged transaction is reported in income, while IFRS allows permanent reporting of these...

Why is fair value critical to U.S. GAAP and IFRS and how do they differ in...

Why is fair value critical to U.S. GAAP and IFRS and how do they differ in the application of fair value?

Question