Impairment of long-lived assets under US GAAP (for the @CFA Level 1 exam)

[@GeniusAjinkya]

Man, this was one of the best explanations I have ever heard, thank you so much for helping people like me who can't afford classes.

[@letmeexplaincfa]

Thank you, you’re welcome!

[@harshilwadhwani236]

For last minute concept revision this was the best video I have seen

[@letmeexplaincfa]

Thank you!

[@alaataktokani8884]

Wooow this channel/ videos are a hidden gem .. thanks !

[@letmeexplaincfa]

You’re welcome👍

[@grin2455]

Your videos are fantastic for quick concept revision - would love one for two stage DDM, although unsure if you have one already and I’ve missed it

[@letmeexplaincfa]

Hi thanks for this! No, you didn't miss it. I just haven't gotten around to doing it yet :)

[@KayvanShah-y8k]

Thank you !!

[@mostafaemad740]

professor , is this something included in our curriclum ? Which of the following is best estimated by the ratio of net PP&E to annual depreciation expense? A) Remaining useful life. B) Average age. C) Total useful life.

[@letmeexplaincfa]

Yes, it is. The correct answer should be A.

[@ariukaa27]

Thank you 🙏

[@letmeexplaincfa]

Thanks for taking the time to comment🙏

[@pranavjain9376]

Does Fair Value include selling costs

[@letmeexplaincfa]

Whilts I am not a big expert on US GAAP, it does not mention any adjustment for selling costs, so I think the answer is NO. Fair value on its own should therefore be considerd as the price at which an asset could be sold.

[@youna2971]

Hello boss, correct me if im wrong, but isn't US GAAP doesn't permit for IA reversals? Im confused why you wrote that the Carrying amount of 35 is recoverable since it is lower than the undiscounted exp future CFs of 35.5.

[@SassiMouadh]

hey sir, a question please: under IFRS in the impairment we do the mesure based on the discounted expected future CF, but under GAAP we do the mesure on the undiscounted, why ? Personnally I found the discounted is more real !

[@letmeexplaincfa]

I really don't know the logic behind the US GAAP approach :) It baffles me as well

[@atangbingana283]

Had the same questionTY @@letmeexplaincfa

[@mostafaemad740]

i think there is still a part of analysis of long lived assets not explained yet , right ?

[@letmeexplaincfa]

Yes, there is👍 there are also other videos on this topic in the older FSA playlist

[@westportcapital5636]

god sent

[@letmeexplaincfa]

Great to hear!

[@ronusa211]

What if there was impairment loss

[@letmeexplaincfa]

This is actually quite tricky. Under US GAAP you first assess whether the carrying amount is recoverable by comparing it with the undiscounted future cash flows (which I do in the video). If carrying amount proves to be higher you indeed record an impairment loss which is equal to the difference between the carrying amount and the asset's fair value. I wrote this out as Step 2 in the video. The asset would essentially need to be written down to its fair value.

[@ronusa211]

@@letmeexplaincfa Thank you