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1				Impairment of Long-Lived Non-Financial Assets
2	Instructions: this screen reflects the data-sets you define in the INPUT screen's yellow-shaded cells and the Canadian ASPE and U.S. GAAP treatment.			Property, Plant & Equipment (PP&E).		Limited-Life Intangible Assets.		Indefinite-Life Intangible Assets.		Goodwill [the values below pertain to the Reporting Unit/Cash-Generating-Unit, including its Goodwill].
3	Has management observed events & circumstances indicating that there might be an impairment?			Yes		Yes		Yes		Yes
4	Carrying amount
5	Fair value
6	Costs of disposal
7	Undiscounted future cash flows from use and eventual sale
8	Present value of the future cash flows from use and eventual sale
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11		Canadian ASPE and U.S. GAAP*			Note		Note		Note		Note
12		Should the asset be tested for impairment?		Yes, because ASPE 3063.09 states 'A long-lived asset shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable' and management in this case has observed such events or circumstances. [Comment: ASPE Section 3063 Impairment of Long-Lived Assets deals with the impairment of various long-lived assets including (i) PP&E and (ii) Limited-Life Intangible Assets. ASPE Section 3064 Goodwill and Intangible Assets deals with the impairment of (i) Goodwill and (ii) Indefinite-Life Intangible Assets.]	1. 2.	Yes, because ASPE 3063.09 states 'A long-lived asset shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable' and management in this case has observed such events or circumstances. [Comment: ASPE Section 3063 Impairment of Long-Lived Assets deals with the impairment of various long-lived assets including (i) PP&E and (ii) Limited-Life Intangible Assets. ASPE Section 3064 Goodwill and Intangible Assets deals with the impairment of (i) Goodwill and (ii) Indefinite-Life Intangible Assets.]	1. 11.	Yes, because ASPE 3064.65 states 'An intangible asset that is not subject to amortization shall be tested for impairment whenever events or changes in circumstances indicate that its carrying amount may exceed its fair value' and management in this case has observed such events or circumstances. [Comment: ASPE Section 3064 Goodwill and Intangible Assets deals with the impairment of (i) Goodwill and (ii) Indefinite-Life Intangible Assets. ASPE Section 3063 Impairment of Long-Lived Assets deals with the impairment of various long-lived assets including (i) PP&E and (iI) Limited-Life Intangible Assets.]	1. 12.	Yes, because ASPE Section 3064.72 states: 'Goodwill shall be tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the reporting unit to which the goodwill is assigned may exceed the fair value of the reporting unit.' and management in this case has observed such events or circumstances. [Comment: ASPE Section 3064 Goodwill and Intangible Assets deals with the impairment of (i) Goodwill and (ii) Indefinite-Life Intangible Assets. ASPE Section 3063 Impairment of Long-Lived Assets deals with the impairment of various long-lived assets including (i) PP&E and (ii) Limited-Life Intangible Assets.]	1. 16.
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14		Is the asset impaired?		No, because the carrying amount $4,000,000 does not exceed $4,100,000, the sum of the undiscounted cash flows expected to result from its use and eventual disposition. This scenario provides an opportunity to criticise Canadian ASPE's and U.S. GAAP's approach to impairment testing of Property, Plant, & Equipment: the test indicates that the asset is not impaired while ignoring the fact that the asset's $4,000,000 carrying amount exceeds both (i) the asset's $3,200,000 fair value and (ii) its $3,500,000 discounted cash flows from use and eventual disposal. Most rational observers would regard this as evidence of an impaired asset! [Comment - see Note 11: Section 3063's approach to impairment testing and recognition is used for both PP&E and Limited-Life Intangible Assets but not for Indefinite-Life Intangibles or Goodwill.]	1. 2.	No, because the carrying amount $4,000,000 does not exceed $4,500,000, the sum of the undiscounted cash flows expected to result from its use and eventual disposition. This scenario provides an opportunity to criticise Canadian ASPE's and U.S. GAAP's approach to impairment testing of Limited Life Intangible Assets: the test indicates that the asset is not impaired while ignoring the fact that the asset's $4,000,000 carrying amount exceeds both (i) the asset's $3,500,000 fair value and (ii) its $3,000,000 discounted cash flows from use and eventual disposal. Most rational observers would regard this as evidence of an impaired asset! [Comment - see Note 11: Section 3063's approach to impairment testing and recognition is used for both PP&E and Limited-Life Intangible Assets but not for Indefinite-Life Intangibles or Goodwill.]	11	Yes: the impairment test indicates the asset is impaired because its carrying amount of $4,000,000 exceeds $3,500,000, its fair value (see note 13 below). [Comment: Section 3064's approach to impairment testing differs from Section 3063's. Section 3064's testing approach seeks only to determine if the indefinite-life intangible asset's carrying amount exceeds its fair value: the data provided for (i) the $4,500,000 undiscounted future cash flows from use and eventual sale, (ii) the $3,600,000 present value of the future cash flows from use and eventual sale, and (iii) the $20,000 costs of disposal are not used under this approach. Section 3063's approach is not used for Indefinite-Life Intangibles or Goodwill and is used only for PP&E and Limited-Life Intangible Assets. Both Sections 3063 & 3064 employ what is called the 'cost recovery method'.]	13. 14.	No, because the carrying amount $16,000,000 does not exceed $18,000,000, its fair value (see note 13 below). [Comment: Section 3064's approach to impairment testing differs from Section 3063's. Section 3064's testing approach seeks only to determine if the reporting unit's (including goodwill) carrying amount exceeds its fair value: the data provided for (i) the $14,500,000 undiscounted future cash flows from use and eventual sale, (ii) the $12,800,000 present value of the future cash flows from use and eventual sale, and (iii) the $250,000 costs of disposal are not used under this approach. Section 3063's approach is not used for Indefinite-Life Intangibles or Goodwill and is used only for PP&E and Limited-Life Intangible Assets.]	13. 14. 17.
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16		If testing deems the asset impaired, what is the amount of the impairment loss that should be recognised in the income statement?		Not applicable: no impairment identified (see above).	5	Not applicable: no impairment identified (see above).	5	An impairment loss of $500,000 is recognized: this is the amount by which the $4,000,000 carrying amount exceeds the $3,500,000 fair value. [Comment: under ASPE, for (i) PP&E, (ii) Limited-LIfe Intangible Assets, and (iii) Indefinited-Life Intangible Assets and Goodwill, an impairment loss is measured as the excess of the carrying amount over the fair value.]	14	Not applicable: no impairment identified (see above). [Comment: under ASPE, for (i) PP&E, (ii) Limited-LIfe Intangible Assets, and (iii) Indefinited-Life Intangible Assets and Goodwill, an impairment loss is measured as the excess of the carrying amount over the fair value.]	14. 17.
17		Can an impairment loss reversal be recognized in a subsequent period, and if so, what is the limit, if any, to the amount of the reversal?		No. ASPE Section 3063.06: An impairment loss shall not be reversed if the fair value subsequently increases.
18	*	Canadian ASPE (Accounting Standards for Private Enterprises) are very similar to current U.S. GAAP in the measurement and recognition of the impairment of long-lived non-financial assets. (See U.S. Codification Topics 360 Property, Plant and Equipment, and 350 Intangibles - Goodwill and Other).
19	Note 1	ASPE Section 3063 Impairment of Long-Lived Assets deals with the impairment of various long-lived assets including (i) PP&E and (ii) Limited-Life Intangible Assets. ASPE Section 3064 Goodwill and Intangible Assets deals with the impairment of (i) Goodwill and (ii) Indefinite-Life Intangible Assets.
20	Note 2	ASPE Section 3063, paragraph 09: A long-lived asset shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.
21	Note 3	ASPE Section 3063, paragraph 05, excerpt: The carrying amount of a long-lived asset is not recoverable if the carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition…. [Comment: this impairment testing reflects a 'cost recovery approach', and contrasts with the 'rational entity approach' used by IFRS. See Note 9 on the IFRS screen.]
22	Note 4	ASPE Section 3063, paragraph 04: An impairment loss shall be recognized when the carrying amount of a long-lived asset (i) is not recoverable and (ii) exceeds its fair value. (numbering added)
23	Note 5	ASPE Section 3063, paragraph 06, excerpt: An impairment loss shall be measured as the amount by which the carrying amount of a longlived asset exceeds its fair value….
24	Note 11	ASPE Section 3064.64: An intangible asset that is subject to amortization shall be tested for impairment in accordance with the provisions of IMPAIRMENT OF LONG-LIVED ASSETS, Section 3063.
25	Note 12	ASPE Section 3064.65: An intangible asset that is not subject to amortization shall be tested for impairment whenever events or changes in circumstances indicate that its carrying amount may exceed its fair value.
26	Note 13	ASPE Section 3064.08(f): Fair value is the amount of the consideration that would be agreed upon in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act.
27	Note 14	ASPE Section 3064.66: When the carrying amount of the intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to the excess.
28	Note 16	ASPE Section 3064.72: Goodwill shall be tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the reporting unit to which the goodwill is assigned may exceed the fair value of the reporting unit.
29	Note 17	ASPE Section 3064.76: When goodwill and another asset (or asset group) of a reporting unit are tested for impairment at the same time, the other asset (or asset group) is tested for impairment before goodwill. For example, when a significant asset group is to be tested for impairment (thus potentially requiring a goodwill impairment test), the impairment test for the significant asset group is performed before the goodwill impairment test. When the asset group is impaired, the impairment loss is recognized prior to goodwill being tested for impairment. [Comment: The Accounting Onion (viewed 26 June 2011) argues that under U.S. GAAP, the last long-lived asset to be tested for impairment, and written down, is always goodwill; but under IFRS, all long-lived assets are tested together, and the first asset to be written down is generally goodwill.] See The Accounting Onion at:
30		accountingonion.typepad.com/theaccountingonion/2011/05/goodwill-impairment-accounting-could-become-less-costly-and-earnings-management-a-lot-easier.html
31	These excerpts are reprinted with permission from the CPA Canada Handbook - Accounting, ©2023, ASPE 3063 and ASPE 3064, by Chartered Professional Accountants of Canada. All rights reserved by copyright owner.
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