Research Methodology for Using the FASB ASC

Research Methodology for Using the ASC

• Begin by navigating through the American Accounting Association website to the official FASB Accounting Standards Codification website.

• Utilize the search function of the ASC website by entering in key terms. For this case, phrases such as “impairment of property, plant, and equipment,” and “criteria for held-for-sale assets” were used.

• Navigate through the search results to find the general topic that information is needed for. In this case, going to the “Subsequent Measurement” section of the “Property, Plant, and Equipment” topic proved quite useful. This topic (360) contained a wealth of authoritative literature on accounting for fixed assets. Also helpful was topic 350, dealing with accounting for “Intangibles—Goodwill and Other.”

• Use the drop-down navigation menus to browse more specific subjects and paragraphs within each topic. Particularly, these navigation links were crucial when it came to locating specific paragraphs regarding “Measurement of an Impairment Loss” for both fixed assets and intangibles.

• Take note of specific paragraphs and their section numbers (i.e. 360-10-35-17 discusses impairment losses on fixed assets) so they can be reproduced in exhibits to the case analysis and referenced in the case write-up.

• Note: Oftentimes within a paragraph, links to other resources are included. This occurred, for example, in 360-10-35, a discussion of impairment of long-lived assets that are classified as held-and-used. This paragraph included a link to paragraph 360-10-45-9 which conveniently listed the six criteria that long-lived assets are required to meet, should they alternatively be classified as held-for-sale.

FASB Accounting Standards Codification Study 3

ASC 360-10-45-9 outlines a list of six criteria that an asset must meet in order to be classified as “held-for-sale.” These criteria are listed completely in Exhibit E, and include the following: Management plans to sell the asset; the asset can be sold immediately; the company is actively seeking a buyer; the asset is presumed salable within one year; the asset is reasonably priced; and the company is pursuing these actions with no expectation to change its plan to sell the asset.

ASC 360-10-35-43 discusses the recognition of impairment charges to long-lived assets that are classified as held-for-sale. As presented in Exhibit F, “a long-lived asset (disposal group) classified as held for sale shall be measured at the lower of its carrying amount or fair value less cost to sell.” This section goes on to say that long-lived assets that meet the held-for-sale criteria should not be depreciated.

FASB ASC paragraph 360-10-45-9, Property, Plant, and Equipment - Overall – Other Presentation Matters – Impairment or Disposal of Long-Lived Assets – Long-Lived Assets Classified as Held for Sale – Initial Criteria for Classification as Held for Sale

FASB ASC paragraph 360-10-35-43, Property, Plant, and Equipment - Overall – Subsequent Measurement – Impairment or Disposal of Long-Lived Assets – Long-Lived Assets Classified as Held for Sale – Accounting While Held for Sale

Ibid.

FASB Accounting Standards Codification Study 2

To measure an impairment loss for property, plant, and equipment to be held and used, ASC 360-10-35-17 (Exhibit A) instructs the accountant to: Measure “the amount by which the carrying amount of a long-lived asset exceeds its fair value.” When it comes to intangible assets, authoritative literature can be found in ASC 350-30-35-14, which states that “an impairment loss shall be recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds fair value.” The ASC also says that reversal of an impairment loss previously recognized is not allowed, an excerpt of which appears in Exhibit D.

FASB ASC paragraph 360-10-35-17, Property, Plant, and Equipment - Overall – Subsequent Measurement – Impairment or Disposal of Long-Lived Assets – Long-Lived Assets Classified as Held and Used – Measurement of an Impairment Loss

FASB ASC paragraph 350-30-35-14, Intangibles—Goodwill and Other – General Intangibles Other than Goodwill – Subsequent Measurement – General – Recognition and Measurement of an Impairment Loss – Intangible Assets Subject to Amortization

FASB Accounting Standards Codification Study

The FASB Accounting Standards Codification (ASC) includes authoritative literature pertaining to the impairment of fixed and intangible assets. Section 360-10-35-17, contained in Exhibit A, reads: “An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value.” The date on which the asset is tested for recoverability is determined in Section 360-10-35-21, included in Exhibit B: “A long-lived asset shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.” The treatment of intangibles is slightly different however, and is covered in Section 350-30-45-3, included in Exhibit C. The ASC states: “An intangible asset [should] be tested for impairment when it is determined that the asset shall no longer be amortized or shall begin to be amortized due to a reassessment of its remaining useful life.”

FASB ASC paragraph 360-10-35-17, Property, Plant, and Equipment - Overall – Subsequent Measurement – Impairment or Disposal of Long-Lived Assets – Long-Lived Assets Classified as Held and Used – Measurement of an Impairment Loss

FASB ASC paragraph 360-10-35-21, Property, Plant, and Equipment - Overall – Subsequent Measurement – Impairment or Disposal of Long-Lived Assets – Long-Lived Assets Classified as Held and Used – When to Test a Long-Lived Asset for Recoverability

FASB ASC paragraph 350-30-45-3, Intangibles—Goodwill and Other – General Intangibles Other than Goodwill – Other Presentation Matters – General