Asset Impairment

An impaired asset is an asset that has a market value less than the value listed on the company's balance sheet. When an asset is deemed to be impaired, it will need to be written down on the company's balance sheet to its current market value. Asset impairment losses decrease the ROU asset value but do not affect the liability.

Note: Asset impairment cannot be entered for short term leases or low value leases because no assets were created.

If the activation group is classified under IFRS 16, an asset impairment gain event can also be entered to adjust the amount of the impairment loss that was previously recorded (i.e., this event will not reverse the original impairment event).

Both the impairment loss and gain are recorded in the following P&L and balance sheet asset accounts:

  • Impairment losses in IFRS 16 are recorded as:
    • A debit entry in the Impairment Loss/Gain (P&L) account
    • A credit entry in the Accumulated Impairment Loss /Gain (B/S) account

    Note: The retirement documents generated for impaired assets will have an additional debit entry for Accumulated Impairment, as well as an additional credit entry for Accumulated Impairment in a Purchase Option scenario.

  • Impairment gains in IFRS 16 are recorded as:
    • A credit entry in the Impairment Loss/Gain (P&L) account
    • A debit entry in the Accumulated Impairment Loss/Gain (B/S) account
  • Impairment losses in ASC 842 are recorded as:
    • A debit entry in the Impairment Loss/Gain (P&L) account
    • A debit entry in the Accumulated Depreciation account
    • A credit entry in the ROU GBV account

Refer to the following topics for specific instructions on how to perform impairment losses and gains: 

See also:  

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