Impairment losses are an unanticipated decline of value and occurs when an asset’s recoverable amount (which is the fair value minus the cost to sell and value in use) is less than the carrying amount. Impairments are recognized in the income statement, as an expense. Do note, value in use is the present value of the future cash flows expected from the asset. Moreover, fair value minus cost to sell is the amount obtainable in a sale of the asset.
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