On the issue of asset impairment, how does the "two-tier" test work in determining whether an asset has suffered impairm...
On the issue of asset impairment, how does the "two-tier" test work in determining whether an asset has suffered impairment and the amount of the impairment loss?
Homework Answers
The two tier test work is common sense in fair value accounting. First test is recoverability of the book value of the asset. The fair value of the asset is calculated which may be the discounted value of future cash flows from the asset. Fair value can also be the sale price of the asset on the date of the test if the future cash flows cannot be readily determinable. This can be determined by obtaining an invoice from buyers. Second test is to check whether the fair value calculated is more or less than the book value of the asset. If the fair value is less than the book value, an impairment loss to the extent of the difference is arrived at.
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On the issue of asset impairment, how does the "two-tier" test work in determining whether an asset has suffered impairm...
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How could the auditor determine whether or not this asset has not been impaired?
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