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    haridasp's Avatar
    haridasp Posts: 1, Reputation: 1
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    #1

    Nov 13, 2010, 01:55 AM
    Impairement of Assets
    Just Looking's Avatar
    Just Looking Posts: 1,610, Reputation: 480
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    #2

    Nov 13, 2010, 03:34 AM

    It would help if you would ask a complete question. I'm assuming you are not understanding the concept of impairment of assets.

    An asset is impaired when the asset is no longer worth its book value - that is its carrying cost (original cost less accumulated depreciation) is greater than its future cash flow plus disposal value. This can happen for a number of reasons such as when the asset is outdated due to technology changes, there are changes in the business climate, or there are declines in the asset's usage rate.

    Once an asset is determined to be impaired, you can either write down the asset or reclassify it as an asset to be sold or disposed. The difference being that you will write it down if you plan to keep using the asset. If the asset is no longer in use or is expected to be disposed of, the asset is reclassified, and these assets must be written down to fair value less the cost of selling or disposing them and can no longer be depreciated.
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