The formulas
Long-lived asset: recoverable if undiscounted cash flows ≥ carrying amount; otherwise loss = carrying amount − fair value. Goodwill: loss = min(carrying amount of the reporting unit − fair value of the unit, goodwill), floored at zero. The rules come from ASC 360-10-35 and ASC 350-20-35.
When to use it
Use it to recompute a client's impairment charge, check the order of the tests, or see how a change in fair value moves the loss.
Limits
The tool does not build the cash flow forecast or the fair value, which are the judgments that matter most in an audit. A loss on an asset group is allocated to its long-lived assets pro rata on relative carrying amounts, with no asset reduced below its own fair value, and the tool stops at the group total. It does not test indefinite-lived intangibles, which use a separate fair value comparison.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
How does the long-lived asset test work?
ASC 360-10 uses two steps. First compare the carrying amount of the asset or asset group to the sum of its undiscounted future cash flows, including residual value. If the carrying amount is higher, it is not recoverable. Then the impairment loss is the amount by which the carrying amount exceeds fair value.
When is the test performed?
When events or changes in circumstances indicate the carrying amount may not be recoverable. The standard lists indicators such as a significant decline in market price, an adverse change in use or business climate, and a current expectation that the asset will be sold or disposed of well before the end of its useful life.
How is a goodwill impairment loss measured?
Under ASC 350-20, after ASU 2017-04, the loss is the amount by which a reporting unit's carrying amount, including goodwill, exceeds its fair value, limited to the goodwill allocated to the unit. The former second step that computed implied goodwill is gone.
Is an impairment loss reversed later?
Not for long-lived assets held for use. The reduced carrying amount becomes the new cost basis. Goodwill impairment losses are not reversed either.
What about tax-deductible goodwill?
ASC 350-20 directs the entity to consider the income tax effect of tax-deductible goodwill on the carrying amount of the reporting unit when it measures the loss. This tool does not model that circular effect.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.