Accounting for Impaired Assets Under GAAP

1. Introduction
2. Introduction to Asset Impairment 00:04:49
3. Presentation Objectives 00:07:44
4. The Concept of Impairment 00:08:58
5. Types of Assets Subject to Impairment 00:12:00
6. GAAP Overview: Impairment Framework 00:17:31
7. GAAP Step 1: Recoverability Test 00:19:16
8. GAAP Step 2: Measuring Impairment Loss 00:21:18
9. Asset Grouping Under GAAP 00:23:53
10. Indicators of Potential Impairment 00:27:52
11. Determining Fair Value 00:30:08
12. Timing of Impairment Tests 00:32:23
13. GAAP Treatment: Recording the Impairment 00:33:55
14. GAAP Example: Equipment Impairment 00:35:49
15. Special Considerations: Goodwill 00:37:47
16. Special Considerations: Indefinite-Lived Intangibles 00:41:12
17. Tax Treatment Overview 00:42:36
18. Tax Treatment: Tangible Assets 00:45:42
19. Tax Treatment: Intangible Assets 00:46:36
20. Tax Treatment: Worthless Securities 00:49:07
21. Tax Treatment: Abandoned Assets 00:50:56
22. Example: GAAP vs. Tax Accounting for Equipment 00:52:59
23. GAAP vs. Tax: Temporary vs. Permanent Differences 00:54:42
24. Book-Tax Conformity Considerations 01:00:15
25. Partial Dispositions Under Tax Rules 01:02:49
26. Casualty Losses 01:05:46
27. IFRS Comparison: Asset Impairment 01:07:50
28. Small Business Considerations 01:11:03
29. Impairment vs. Depreciation vs. Obsolescence 01:14:12
30. Financial Statement Impact: Balance Sheet 01:17:36
31. Disclosure Requirements Under GAAP 01:20:05
32. Tax Disclosure and Documentation 01:21:59
33. Impairment Testing Procedures 01:23:21
34. Management Judgments and Estimates 01:24:30
35. Common Audit Issues 01:27:43
36. Industry-Specific Considerations 01:29:21
37. Strategic Considerations: Asset Sales vs. Continued Use 01:30:37
38. Case Study: Commercial Real Estate 01:32:36
39. Case Study: Acquired Intangibles 01:33:56
40. Internal Control Considerations 01:35:50
41. Recent Accounting Standards Updates 01:36:35
42. Tax Planning Opportunities 01:37:50
43. Common Mistakes and Pitfalls 01:39:11
44. Technology Tools for Impairment Testing 01:40:04
45. Best Practices for Impairment Management 01:40:45
46. Presentation Closing 01:41:57

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  Chuck Borek

  Chuck Borek is a practicing attorney and founder of  the Borek Group, LLC. Chuck is also a CPA, and his background includes  five years as a partner in a public accounting firm. He received his law degree and MBA summa cum laude from the University of Baltimore in 1993, where he was editor [...]

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• Abandoned Assets 00:50:56
• Asset 00:01:38, 00:02:57, 00:04:54, 00:12:03, 00:13:30, 00:16:03, 00:22:34, 00:31:06, 00:34:19, 00:37:58, 00:46:16, 00:54:01, 01:10:28, 01:15:35, 01:19:36, 01:26:24, 01:30:44, 01:39:47
• Audit 01:00:51, 01:27:51
• Balance Sheet (BS) 00:01:38, 00:04:06, 00:12:44, 00:19:32, 00L43:42, 01:17:42
• Cash Flow (CF) 00:20:41, 00:19:40, 00:24:40, 00:29:27, 00:36:06, 01:26:39, 01:31:35
• Contract 00:14:10
• Cost 00:01:40, 00:04:33
• Depreciation 00:01:53, 00:05:04, 00:09:11, 00:19:35, 00:43:58, 00:43:59, 01:14:18
• Equity 01:19:46
• Expense 00:56:32
• Fair Market Value (FMV) 00:12:07,  00:18:10, 00:22:06, 00:30:11, 01:10:11
• FASB - Financial Accounting Standards Board 01:01:06, 01:37:31
• Financial Statement 00:07:59, 00:10:39, 00:43:43, 00:56:28, 01:00:25
• Flow-through Entity 01:11:38
• Generally Accepted Accounting Principles (GAAP) 00:00:08, 00:06:22, 00:08:00, 00:34:28, 00:37:50, 00:46:00, 00:46:49, 00:52:44, 01:01:28
• Goodwill 00:13:06, , 00:13:26, 01:10:25, 01:36:45
• Impaired Assets 00:00:07, 00:01:28, 00:04:45, 00:46:46
• Income Statement 00:05:58, 01:17:42
• Intangible Assets 00:12:52, 00:41:16
• International Financial Reporting Standards (IFRS) 01:07:51
• Liability 00:45:38
• Like-Kind Exchange 01:38:46
• Present Value (PV) 00:31:01
• Real Property 01:38:50
• Revenue 00:39:34, 01:15:45
• S Corporation 01:11:35
• Section 197 Intangibles 00:46:40
• Shareholder 01:12:03
• Straight Line Amortization 00:46:43
• Tangible Assets 00:12:41, 00:45:48, 01:30:06
• Transaction 00:15:48
• Worthless Securities 00:49:06

Abandoned Assets: Abandoned assets refer to property, often financial, where the owner has not shown interest or activity for a specified period, and the property is then transferred to a state or government agency. This can include unclaimed bank accounts, stocks, insurance policies, and even physical items like personal property left behind in rental units.

Asset: Property owned by a person or company, regarded as having value and available to meet debts, commitments or legacies.

Audit: A formal examination of an organization's or individual's accounts or financial situation

Balance Sheet (BS): A financial report that summarizes a company's assets (what it owns), liabilities (what it owes) and owner or shareholder equity at a given time.

Cash Flow (CF): The revenue or expense expected to be generated through business activities (sales, manufacturing, etc.) over a period of time.

Contract: A written or spoken agreement, especially one concerning employment, sales, or tenancy, that is intended to be enforceable by law.

Cost: The sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location

Depreciation: A reduction in the value of an asset with the passage of time, due in particular to wear and tear.

Equity: The total value of your business after you’ve subtracted what you owe [“liabilities”] from what you own [“assets”].

Expense: Offset (an item of expenditure) as an expense against taxable income.

FASB - Financial Accounting Standards Board: The Financial Accounting Standards Board is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles within the United States in the public's interest.

Fair Market Value (FMV): The term fair market value is used throughout the Internal Revenue Code among other federal statutory laws in the USA including Bankruptcy, many state laws, and several regulatory bodies. In litigation in many jurisdictions in the United States, the fair market value is determined at a hearing.

Financial Statement: Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. ... A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time.

Flow-through Entity: A flow-through entity is a legal entity where income "flows through" to investors or owners; that is, the income of the entity is treated as the income of the investors or owners. Flow-through entities are also known as pass-through entities or fiscally-transparent entities.

Generally Accepted Accounting Principles (GAAP): A set of rules and guidelines developed by the accounting industry for companies to follow when reporting financial data. Following these rules is especially critical for all publicly traded companies.

Goodwill: Goodwill is an intangible asset that is associated with the purchase of one company by another. Specifically, a goodwill definition is the portion of the purchase price that is higher than the sum of the net fair value of all of the assets purchased in the acquisition and the liabilities assumed in the process.

Impaired Assets: An impaired asset is a capital asset, such as machinery, equipment, real estate, patents, or even goodwill, that has unexpectedly lost a significant portion of its value. This happens when the asset's fair market value (what it would sell for in the market today) drops below its book value (its carrying amount recorded on the company's balance sheet).

Income Statement: One of the three primary financial statements used to assess a company's performance and financial position (the two others being the balance sheet and the cash flow statement). The income statement summarizes the revenues and expenses generated by the company over the entire reporting period. (investinganswers.com)

Intangible Assets: An asset that is not physical in nature. Goodwill, brand recognition and intellectual property, such as patents, trademarks and copyrights, are all intangible assets. (www.investopedia.com)

International Financial Reporting Standards (IFRS): International Financial Reporting Standards (IFRS) are a globally recognized set of accounting standards for public companies' financial statements. They are issued by the IFRS Foundation and the International Accounting Standards Board (IASB). The primary goal of IFRS is to enhance the consistency, transparency, and comparability of financial statements across international borders.

Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.

Like-Kind Exchange: A like-kind exchange under United States tax law, also known as a 1031 exchange, is a transaction or series of transactions that allows for the disposal of an asset and the acquisition of another replacement asset without generating a current tax liability from the sale of the first asset.

Present Value (PV): The current value of a future sum of money based on a specific rate of return. Present value helps us understand how receiving $100 now is worth more than receiving $100 a year from now, as money in hand now has the ability to be invested at a higher rate of return. See an example of the time value of money here.

Real Property: Real property is land and any property attached directly to it, including any subset of land that has been improved through legal human actions. Examples of real properties can include buildings, ponds, canals, roads, and machinery, among other things

Revenue: In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover. Some companies receive revenue from interest, royalties, or other fees.

S Corporation: An S corporation, for United States federal income tax, is a closely held corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any income taxes.

Section 197 Intangibles: Section 197 intangibles are certain intangible assets acquired after August 10, 1993 (or after July 25, 1991, if chosen) in connection with the acquisition of a business which must be amortized over 15 years from the date of acquisition regardless of the assets useful life.

Shareholder: A shareholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders may be referred to as members of a corporation.

Straight Line Amortization: Straight-line amortization is a way of calculating debt repayment where a company allocates the same amount of interest for each payment until it repays the debt in full.

Tangible Asset: A tangible asset is an asset that has physical substance. Examples include inventory, a building, rolling stock, manufacturing equipment or machinery, and office furniture.

Transaction: In QuickBooks, a transaction type identifies what kind of transaction occurred, such as a customer transaction, bill payment or a bank transfer. When you submit a transaction, you type in a transaction code to represent it.

Worthless Securities: Worthless securities are financial instruments like stocks or bonds that have completely lost their monetary value. This can happen due to various reasons, such as the issuing company going bankrupt, liquidating its assets, or failing to adapt to changing market conditions.