ACC 499 Week 4 Discussion 2 "Asset Impairments"

7/30/2020 Thread: Week 4 Discussion 2 – ACC499005VA016-1206-001

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Week 4 Discussion 2 C O L L A P S E

posted 9 years ago (last edited 1 year ago)Anonymous

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Compare and contrast the differences between asset impairment under U.S. GAAP and IFRS. What are the financial statement implications of these differences?

"Asset Impairments"

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RE: Week 4 Discussion 2

2 days agoAndrea Caldwell

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Classmates/Professor, Asset Impairment under U.S. GAAP & IFRS GAAP *does not require annual impairment test *recoverability test required *when measuring the impairment loss, GAAP computes the difference between the asset’s book value and its fair value *impairment loss is always reported in the income statement *does not allow a reversal of impairment losses for held and used assets IFRS *requires annual impairment test *no recoverability test * when measuring the impairment loss, IFRS computes the difference between the asset’s book value and its recoverable amount *impairment loss may be reported in other comprehensive income if it reverses a previously recognized upward revaluation of the asset *allows an impairment loss to be reversed if the value is recovered The financial statement implications of these differences involves a company’s profits being overstated. ~L

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RE: Week 4 Discussion 2

2 days agoAndrea Caldwell

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Source:

J.M. Whalen, J.P. Jone, D.P. Pajach. 2017. Intermediate Accounting: Reporting and Analysis (2nd ed.). Mason, OH: Cengage Learning.

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7/30/2020 Thread: Week 4 Discussion 2 – ACC499005VA016-1206-001

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RE: Week 4 Discussion 2

1 day agoAHMAD ABUDIAB

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Hello all. I will be posting many different topics so you will be more ready for the Exam in this class. Please know this exam is comperhensive one that include all the topics that you learned in your degree. So you will know why I am posting different topics Manufacturing costs are typically classified as either (1) direct materials, (2) direct labor, or (3) manufacturing

overhead. Raw materials that can be physically and directly associated with the finished product during the manufacturing process are called direct materials. The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is considered direct labor. Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product. Product costs are costs that are a necessary and integral part of producing the finished product. Product costs are also called inventoriable costs. These costs do not become expenses until the company sells the finished goods inventory. Period costs are costs that are identified with a specific time period rather than with a salable product. These costs relate to nonmanufacturing costs and therefore are not inventoriable costs. What do you all think?

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RE: Week 4 Discussion 2

1 day agoSharon Gammon

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Hello Professor and class,

Finite assets, tangible and intangible:

GAAP: requires a 2 step process, first determining if the carrying amount exceeds undiscounted future cash flows then computing the impairment using discounted cash flows.

IFRS: if the carrying amount is greater than the discounted cash flows or the fair value less disposal costs (whichever the greater), impairment is determined.

Goodwill:

GAAP: If the carrying value is greater than the fair value there is impairment. The measurement of impairment is determined using the residual approach after comparing the fair value of all assets in which goodwill is measured.

IFRS: the higher of, the present value of future cash flows, or fair value less disposal costs is the recoverable value. The amount that exceeds the recoverable value is the impairment value.

Sharon G.

https://claytonmckervey.com/ifrs-vs-gaap-impairment-of-assets/

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RE: Week 4 Discussion 2

1 day agoAmber Martin Overall Rating:

Hello Class and Professor,

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7/30/2020 Thread: Week 4 Discussion 2 – ACC499005VA016-1206-001

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Asset impairment between IFRS (International Financial Reporting Standards) and U.S GAAP (Generally Accepted Accounting Principles) requires both tangible and intangible assets to be highlighted when there is an impairment (Churyk, Reinstein and Gross, 2010). In both cases, they require the assets to be tested for both finite and infinite and check if there is any indication of impairment, and there is a need to ensure they are tested on an annual basis. However, there is a difference between asset impairment between U.S GAAP and IFRS. Under the U.S GAPP, the finite tangibles there is a need to undertake a two-step process to test any impairment while in IFRS, the impairment is determined in case the calculate value supersede the discounted cash flows or fair value adjustments done (Churyk, Reinstein and Gross, 2010). When evaluating the goodwill under IFRS, the determination of the impairment and necessary calculations of the impairment is determined within one step. In the event, the recoverable value is it exceeds; then it is located as the first to goodwill and the rest intangible assets on a pro-rata basis(Jerman and Manzin, 2008). Thus the development costs are expensed as incurred (Jerman and Manzin, 2008). However, under the U.S GAAP, there is two steps process that is needed for fair value to varying value. In the event the carrying value is more than the fair value, then the asset is highlighted to be impaired. Thus to determine the impalement, there is a need to make a comparison of the fair value on all assets by exploring the residual approach. When undertaking impairment testing process under U.S GAAP requires determination on the level of impairment that is based on the valuation of all entities both tangible and intangible, but under IFRS the impairment is identified to be equal to the difference that is established between the fair value and carrying value of the whole entity (Churyk, Reinstein and Gross, 2010). Lastly, under the GAAP, the fixed assets are regarded as historical costs and can be depreciated while under IFRS, the fixed assets are initially regarded as costs and have the potential to be valued either up or down about the market value (Jerman and Manzin, 2008).

References Churyk, N. T., Reinstein, A., & Gross, G. M. (2010). Raleigh building products: A teaching case that highlights the differences between IFRS and US GAAP. Journal of Accounting Education, 28(2), 128-137. Jerman, M., & Manzin, M. (2008). Accounting Treatment of Goodwill in IFRS and US GAAP. Organizacija, 41(6), 218-225.

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RE: Week 4 Discussion 2

1 day agoEldris Ortiz Overall Rating:

IFRS requires a company to assess once indicators of impairment exist annually, and under U.S. GAAP requires a review only when events or changes exist. Under IFRS, there is no recoverability test which is required under U.S. GAAP. Measuring the impairment loss, IFRS estimates the loss as the difference between the asset's book value and its recoverable amount and. U.S. GAAP calculates the impairment loss as the difference between the asset's book value and its fair value. • Under U.S. GAAP, an impairment loss is always reported on the income statement. In contrast, under IFRS, an impairment loss may be reported in other comprehensive income.

They U.S.GAAP and IFRS require tangible and intangible assets to be written down when impaired occur, both present difference.

The financial statement implications of theses difference it the recognition of an impairment loss is intended to increase the utility of a company's financial statement by recording the loss in the period it is incurred and reporting productive asset at their fair value. This information

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can help investors to the wrong decision make and risk the company's capability to continue operating.

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