Academic journal article Journal of Accountancy

FASB Issues Reports on Asset Impairment and Not-for-Profit Field Tests

Academic journal article Journal of Accountancy

FASB Issues Reports on Asset Impairment and Not-for-Profit Field Tests

Article excerpt

In order to give CPAs guidance and examples of how some organizations have applied the provisions of Financial Accounting Standards Board exposure drafts, the board published special reports on the results of two field tests.

Impairment. The ED on Accounting for the Impairment of Long-Lived Assets proposed guidance for recognizing and measuring these losses. Since mid-1994 the board has added capital leases of lessees to the scope of the final statement and required regulated enterprises to recognize as assets costs subject to recovery through rates that were previously disallowed. The board is still deliberating other changes, including the effective date of the final statement.

Ten companies participated in the field test, detailing the accounting policies and procedures they used in recognizing and measuring previous impairment losses and adjustments to carrying amounts of assets to be disposed of and then showing what the effects would have been had they applied the ED provisions. The participants considered impairment assets whose carrying amounts totaled $6.4 billion. They found the proposed statement accelerated recognition or increased the dollar amount of impairment losses, compared with the impairment losses they actually recognized. The Financial Executives Institute's committee on corporate reporting collaborated on designing and conducting the test. …

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