How to test the assets for possible impairment, Accounting Standards

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How to test the assets for possible impairment

Impairment; property, plant, and equipment

Response to the following problem:

Collison and Ryder Company (C&R) has been experiencing declining market conditions for its sportswear division. Management decided to test the assets of the division for possible impairment.

The test revealed the following: book value of division's assets, $26.5 million; fair value of division's assets, $21 million; sum of estimated future cash flows generated from the division's assets, $28 million.

What amount of impairment loss should C&R recognize?

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Accounting Standards: How to test the assets for possible impairment

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