Impairment of Property, Plant, and Equipment

This video shows how to calculate an impairment of Property, Plant, and Equipment according to Generally Accepted Accounting Principles in the United States. There is a 2-step process: step 1 determines whether an impairment is required, and step 2 determines the amount of the impairment (if step 1 indicates one is required).
Step 1: Compare the asset's book value (original cost minus accumulated depreciation) to the undiscounted future cash flows the asset is expected to generate. If the expected cash flows are less than the book value, then the asset is impaired (go to Step 2).
Step 2: Subtract the asset's fair value from its book value. The resulting figure is the amount of the impairment charge. You then debit impairment expense (this goes on the Income Statement and reduces Net Income) and credit the asset account for the asset that is being impaired (this reduces total assets on the Balance Sheet).
Please note: if the expected future cash flows are higher than the asset's book value, then the asset is NOT impaired, even if it's fair value happens to be lower than its book value. You only do Step 2 if Step 1 indicates the asset is impaired.-
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I love comments like these, because they keep me motivated to make more videos. Mary, I wish you the best in your classes and I'm pulling for you to pass that CPA!

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[@Edspira]

I'm really glad that Edspira helped you! I've created some course materials on the Edspira website, but I'm working on more written content. The financial accounting course on Edspira is better organized than KZbin, and contains some practice exercises and quizzes. You can check it out here: www.edspira.com/courses/financial-accounting/ Thanks for watching!

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Noncash expenses are cool. I like seeing this stuff get adjusted on the cash flow statement.

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I was hesitate to click in due the the black background and neon notes, but! The lecture is right on the point, Super clear instructions. Thank you!

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*Core accounting knowledge, thank you for this video Sir.*

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Thank you for explaining terminology very well. I'm struggling with all difficult words now..

[@Edspira]

Happy to help!

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Thanks Sir May Almighty bless u with peace & Happiness

[@motseimodise387]

Thank you so much for this video. Now I understand how impairment is calculated.

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Best explanation ever, thanks so much.

[@Edspira]

Glad it was helpful!

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Always very helpful! Thank you!

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This was so helpful. Thank you!

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Awesome.....as usual........thank you so much for sharing ......

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[@Edspira]

No problem!

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Wow, thanks!

[@mthunzimapatwana]

Thank you very much sir that was straight forward and simple

[@cool1u1]

Excellent stuff , learnt a lot for exams

[@accmasmali]

it's a great video as always, Hope you show us how to account for impairment under IFRD too, Thanks.

[@DerrickAMedina]

really find your videos useful.. Would you please make videos concerning Partnership liquidation and allocation of income? Both advanced accounting topics that would be extremely useful ! thank you

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Thank you, your videos help alot.

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Thanks a lot, it was really helpful!

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May i ask you to explain by video when we have to expense / capitalize "research and development" costs ?

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You are amazing, thank you!

[@leonardofrale6839]

Nice video, It is very usefull

[@amrmunir4483]

Thanks for the great information , I have a question, my company used to do impairment but they don't reduce the PPE but they make GL entry DR expenses and CR allowance or provision, is this entry is ok? I don't remember if this in PPE or investment, please advise

[@tammyschoenfeldt7625]

Thanks!

[@Edspira]

Thank you for your support!

[@shakoomino6127]

Isn’t impairment loss = book value - max future cash flows/fair value = 30k-10k=20k Using future cash flow since its higher than fair value.

[@elibirguitar]

Hi! What is the intuition behind step 1? Won't the cash flow disappear since the machine broke? Thanks.

[@jpizzel9629]

Why is the undiscounted cash flow used instead of the discounted cash flow in step 1? What is the reasoning behind that?

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[@manniedelarosa1099]

Thanks.

[@Slammy_2]

What happens when you are not given the estimated amount

[@insertname8511]

Doesn't impairment violate the cost principle?

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What program are you using, sir?

[@Edspira]

I use Camtasia and SmoothDraw

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Now I’m craving Pizza 🍕

[@alfredokumu]

what if the future value was $ 30000?

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Please make a video on Govt accounting and NPO.

[@Edspira]

I'm planning on making more content this summer. Right now I'm teaching 5 classes and I don't have the time to make extra videos. I'll definitely put this on my list of videos to make. Thanks for watching!

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Yes, sir. Thank-you. Waiting for your updates.

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Does anybody know what software he is using?

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Camtasia Studio and Wacom Bamboo tablet

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I had lost hope🥺