What Are Impairment Losses?
Asset impairment loss (Assets Devaluation) refers to the loss caused by the asset's book value is higher than its recoverable amount. The new accounting standards stipulate that the scope of asset impairment is mainly to deal with the impairment of fixed assets, intangible assets and other assets except special provisions. The "Asset Impairment" standard changed the practice of reversing the impairment provision of fixed assets, intangible assets, etc. Once the asset impairment loss is confirmed, it cannot be reversed in subsequent accounting periods, eliminating the secrets of some enterprises through accrual The possibility of being prepared to regulate profit limits the artificial fluctuation of profit. Asset impairment losses belong to the category of profit and loss in accounting.
Asset impairment loss
- It mainly involves corporate non-current assets, including:
- 1. For subsidiaries, associates and joint ventures
- 1. The measurement result of recoverable amount shows that if the recoverable amount of the asset is lower than its book value, the book value of the asset shall be
- I. The accounting enterprise of the undergraduate account shall accrue losses arising from various asset impairment provisions in accordance with criteria such as asset impairment.
- 2. The account of the subject shall be accounted for in detail according to the item of asset impairment loss.
- 3. If an enterprise determines the impairment of an asset based on criteria such as asset impairment, it shall debit the account and credit "
- The asset impairment loss incurred by an enterprise shall be set up for the "asset impairment loss" account, and detailed accounting shall be carried out according to the specific items of asset impairment loss in the "asset impairment loss" account. At the end of the period, "asset impairment loss" should be
- Asset impairment loss = book value of assets-recoverable amount of assets
- Book value of assets = book balance of assets-provision for bad debts.
- At the beginning of 2010, Company A's account receivable from Company B was 100w. In February, company B's poor management led to poor financial conditions, and company A provided for bad debts.
- 10w. In March, the financial condition of company B did not improve and continued to decline. A expected the recoverable amount of this account to be 70w.
- Company A should make provision for impairment in March = book balance-provision for bad debts-recoverable amount = 100w-10w-70w = 20w
- March accounting entries:
- Borrow: Asset impairment loss-provision for bad debts of company B 200,000.00
- Loan: Bad debt provision 200,000.00
- 1. Fixed assets, construction in progress
- 1. Calculation of goodwill. Generally encountered are controlling mergers formed under the same control. Goodwill is the portion of the actual cost of the merger that is greater than the fair value of the identifiable net assets of the invested unit that should be enjoyed. If it is a wholly-owned subsidiary, the goodwill is all that the parent company should confirm in the consolidated statement; if it is not a wholly-owned subsidiary, the goodwill in the consolidated statement does not include the goodwill enjoyed by minority shareholders' equity.
- 2. The essence of goodwill impairment test. It has been explained before that goodwill is an asset that must be tested for impairment on the balance sheet. Compared to other assets, goodwill is special. Because several assets other than goodwill and intangible assets with uncertain amortization periods are tested for impairment only after they show signs of impairment, goodwill must be tested for impairment at each balance sheet date . The impairment test of goodwill is actually a group company's impairment test of the net assets of its subsidiaries. So the asset group here is actually the entire subsidiary. For goodwill, since it cannot be allocated to a specific asset group, the treatment is similar to the headquarters assets that cannot be reasonably allocated. The difference is that the goodwill and the entire subsidiary as a whole, if the impairment occurs, the impairment must first decrease the goodwill. If it is a non-wholly owned subsidiary, the impairment should decrease the entire goodwill (including minority shareholders' equity) Part of the goodwill), and then if there is a recoverable amount of an asset, there is a limit on the amount of impairment that can be allocated, and the book value after the impairment cannot be lower than the recoverable amount of the asset, then this The value limit is the limit for the impairment of the asset.
- 3. Regarding the treatment of goodwill impairment:
- (1) First, an impairment test shall be performed on asset groups that do not contain goodwill. If the asset group is impaired, then the goodwill is definitely impaired, then the goodwill as a whole is recognized for impairment, and the calculated impairment is recognized as the asset group's impairment. If the asset group that does not include goodwill has not been impaired, in order to further determine whether goodwill has been impaired, you need to enter the second step.
- (2) Impairment tests are performed on asset groups that include goodwill. If impairment occurs, the value of goodwill shall be deducted first; if there is a difference after the deduction, it shall be recognized as the impairment of the asset group. The portion of the goodwill impairment should be determined according to the equity proportion of the goodwill impairment provision that the group company should reflect; at the same time, for the asset group, the recognized impairment still needs to be calculated based on the equity proportion of the impairment that should be shared and recognized as the current period Impairment loss.
- 4. The procedure for the impairment test of goodwill is fixed. The first step is a tentative step. If the detection finds that the asset group is impaired, then the goodwill is fully impaired, and the impairment recognized by the asset group can be considered as the impairment that the asset group that does not include goodwill should be recognized, then the impairment test of goodwill at this time So far, it is not necessary to proceed to the second step; if the first test shows that the asset group has not been impaired, then in order to further confirm whether the goodwill has been impaired, you need to proceed to the second step of processing.
- Therefore, the process of goodwill impairment is basically useful, and the first step cannot be resolved and the second step is entered. This calculation method is basically similar to the computer program design. The work that can be completed in the first step is not transferred to the second step; the work that cannot be completed in the first step is automatically transferred to the second step. It should be said to be more advanced.