Question

What are the two steps to record an impairment loss? a. Test for impairment and measure the impairment loss

b. Identify the asset and determine the recoverable amount
c. Calculate the carrying amount and compare it to the recoverable amount
d. Assess the fair value and record the impairment loss

Answer 1

The two steps to record an impairment loss involve testing for impairment and measuring the impairment loss, and identifying the asset and determining the recoverable amount.

Step-by-step explanation:

The two steps to record an impairment loss are:

1. Test for impairment and measure the impairment loss: This involves assessing whether an asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use.
2. Identify the asset and determine the recoverable amount: Once an impairment is identified, the asset must be identified and its recoverable amount must be determined. The recoverable amount is the amount that the asset is expected to generate in the future.