Fasb Codifcation

873 Words Aug 17th, 2013 4 Pages
Linh Hoang
ACCT 322-001
GAAP Research Part I
Professional Research: FASB Codification Chapter 11 a. What is the authoritative guidance for asset impairment? Briefly discuss the scope of the standard (i.e., explain the types of transactions to which the standard applies) The authoritative guidance for asset impairment is to ensure that impairment is recorded and dealt with as depreciation. The scope of the standard is writing off of assets and depreciation. According to the guidance of 360-10-35, it address how long-lived assets that are intended to be held and used in an entity’s business shall be reviewed for impairment. The impairment loss can only be recognized if the carrying amount of a long-lived assets is not recoverable and
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Under the Section 360-10-35-21 in FASB Codification, a long-lived asset shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Following are some examples of events that would cause an asset to be tested for impairment (FASB Codification 360): * The market price of the asset decreases * There is an adverse change in the extent or manner in which the asset is being used or in its physical condition * There is an adverse change in legal factors or in the business climate that could affect value of the asset * Accumulation of costs exceeds the amount expected for acquisition or construction of the asset * There is cash flow loss that might causes continuing losses associated with the use of the asset * Expected that the asset will be sold or disposed of before the end of its estimated useful life In this case of the Klax Company, it does appear that an impairment test should be performed. Since there are increase of competition and the loss of several customers that have recently gone out of business. They should be considered as the adverse changes in the business climate that can affect the value of the asset. Therefore, the plant and equipment need to be tested for impairment. c. What is the best evidence of fair value? Describe alternate methods of estimating fair value. According to the Code 820-10-20, the

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