Impairment Charge
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Impairment Charge
An impaired asset is an asset which has a market value less than the value listed on its owner's balance sheet. According to U.S. accounting rules (known as Generally Accepted Accounting Principles (United States), US GAAP), the value of an asset is impaired when the sum of estimated future cash flows from that asset is less than its book value. At this point an impairment loss should be recognized, which is done by taking the difference between the fair market value (FMV) and the book value and recording this amount as the loss. This basically records the asset as if it were being acquired brand new at its FMV, recording this as its new book value.Albrecht, S., Stice, E., Stice, J., & Swain, M. (2011). ''Accounting: Concepts and applications'' (11th ed.). Mason: South-Western, p. 396–397 This is a common occurrence for goodwill (accounting), goodwill where a company will purchase a target company for more than the value of its net assets. Under US GAAP, goodwill is tested annually ...
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Asset
In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporatio ..., an asset is any resource Resource refers to all the materials available in our environment which help us to satisfy our needs and wants. Resources can broadly be classified upon their availability — they are classified into renewable File:Global Vegetation.jpg, Global ... owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goo .... Assets represent value of ownershi ...
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Balance Sheet
In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporat ..., a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship A sole proprietorship , also known as a sole tradership, individual entrepreneurship or proprietorship, is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the Types of business ent ..., a business partnership Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services). Simply put, it is "any activity or enterprise entered into for profit." Having a busi ...
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Generally Accepted Accounting Principles (United States)
Generally Accepted Accounting Principles (GAAP or U.S. GAAP, pronounced like "gap") is the accounting standard Publicly traded companies typically are subject to the most rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms opera ... adopted by the U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is a large independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929 The Wall Street Crash of 1929, also known as the Great Crash ... (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards International Financial Reporting Standards, commonly called IFRS, are accounting standard Publicly traded companies typically are subject to the most rigorous standards. Small and midsize ...
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Cash Flows
A cash flow is a real or virtual movement of money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of money are distinguished as: a ...: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected to happen in the future, are thus uncertain and therefore need to be forecast with cash flows; *a cash flow is determined by its time ''t'', nominal amount ''N'', currency ''CCY'' and account ''A''; symbolically ''CF'' = ''CF''(''t,N,CCY,A''). * it is however popular to use ''cash flow'' in a less specified sense describing (symbolic) payments into or out of a business, project, or financial product. Cash flows are narrowly interconnected with the concepts of value, ''interest rate'' and li ...
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Book Value
In accounting, book value is the value of an asset according to its balance sheet In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such a ... account balance. For assets, the value is based on the original cost of the asset less any depreciation In accountancy Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which has been ..., amortization Amortization (or amortisation; ) is paying off an amount owed over time by making planned, incremental payments of principal Principal may refer to: Title or rank * Principal (academia) The principal is the chief executive and the chief academi ... or impairment costs made against t ...
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Fair Market Value
The fair market value of property is the price at which it would change hands between a willing and informed buyer and seller. The term is used throughout the Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large The ''United States Sta ..., as well as in bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditor A creditor or lender is a party 300px, '' Hip, Hip, Hurrah!'' (1888) by Peder Severin Krøyer, a painting portraying an artists' par ... laws, in many state laws, and by several regulatory bodies. In litigation in many jurisdictions in the United States the fair market value is determined at a hearing. In certain jurisdictions, the courts are required to hold fair market hearings, even if the borrowers or the loan ...
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Goodwill (accounting)
In accounting Accounting or Accountancy is the measurement ' Measurement is the number, numerical quantification (science), quantification of the variable and attribute (research), attributes of an object or event, which can be used to compare with other ob ..., Goodwill is an intangible asset An intangible asset is an asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive econom ... that arises when a buyer acquires an existing business. Goodwill represents assets that are not separately identifiable. Goodwill does not include identifiable assets that are capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset, or liability regardless of whether the entity intends to do so. Goodwill also do ...
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Lower Of Cost Or Market
Lower of cost or market (LCM or LOCOM) is a conservative Conservatism is an aesthetic Aesthetics, or esthetics (), is a branch of philosophy that deals with the nature of beauty and taste (sociology), taste, as well as the philosophy of art (its own area of philosophy that comes out of aest ... approach to valuing and reporting inventory Inventory () or stock () refers to the goods and materials that a holds for the ultimate goal of resale, production or utilisation. is a discipline primarily about specifying the shape and placement of stocked goods. It is required at differen .... Normally, ending inventory is stated at historical cost In accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which has been called .... However, there are times when the original cost of the ending inventory is gr ...
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United States Generally Accepted Accounting Principles
Generally Accepted Accounting Principles (GAAP or U.S. GAAP, pronounced like "gap") is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the latter differ considerably from GAAP and progress has been slow and uncertain."IFRS: Current situation and next steps"
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More recently, the SEC has acknowledged that there is no longer a push to move more U.S companies to IFRS so the two sets of standards will "continue to coexist" for the foreseeable future.
SEC January 5, 2017, sec.gov
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