| Para No. |
FASB Statement No. 144 |
Issued:
August, 2001 |
| Scope | |||
| 3 | Applies to recognized long-lived assets to be held or used, or to be disposed of, including: | ||
| a. | capital leases of lessees. | ||
| b. | long-lived assets of lessors subject to operating leases. | ||
| c. | proved oil and gas properties accounted for by the successful efforts method. | ||
| d. | long-term prepaid assets. | ||
| 4 | If a long-lived asset (or assets) is part of a group that includes other assets and liabilities not covered by this Statement, this Statement applies to the group. ...the unit of accounting for the long-lived asset is its group. | ||
| For a long-lived asset to be held and used, that group represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. | |||
| For a long-lived asset or assets to be disposed of by sale or otherwise, that group represents assets to be disposed of together as a group in a single transaction and liabilities directly associated with those assets that will be transferred in the transaction. | |||
| This Statement does not change generally accepted accounting principles applicable to those other individual assets (such as accounts receivable and inventory) and liabilities (such as accounts payable, long-term debt, and asset retirement obligations) not covered by this Statement that are included in such groups. | |||
| 5 | This Statement does not apply to | ||
| a. | goodwill. | ||
| b. | intangible assets not being amortized. | ||
| c. | long-term customer relationships. | ||
| d. | financial instruments. | ||
| e. | deferred policy acquisition costs. | ||
| f. | deferred tax assets. | ||
| g. | unproved oil and gas properties accounted for by the successful efforts method. | ||
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Assets to be Held and Used |
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| Recognition and Measurement of an Impairment Loss | |||
| 7 | Impairment is the
condition
that exists when the carrying amount of a long-lived asset exceeds its
fair value. An impairment loss shall be recognized only if the carrying amount...is not recoverable and exceeds its fair value. |
||
| The carrying amount...is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. | |||
| An impairment loss shall be measured as the amount by which the carrying amount...exceeds fair value. (CA-FV = IL) | |||
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| 8 | A company should review its assets for possible impairment whenever the following types of events occur: | ||
| a. | A significant decrease in the market value of an asset. | ||
| b. | A significant adverse change in the way an asset is used or in its condition. | ||
| c. | A significant adverse change in legal factors or in the business climate. | ||
| d. | Asset acquisition or construction cost significantly greater than expected. | ||
| e. | Forecast of continuing losses associated with an asset. | ||
| f. | Asset more likely than not to be sold or disposed of significantly before the end of its previously estimated useful life. | ||
| Grouping Long-Lived Assets to be Held and Used | |||
| 10 | A long-lived asset or assets shall be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. | ||
| 11 | In limited circumstances, a long-lived asset may not have identifiable cash flows that are largely independent of the cash flows of other assets and liabilities and of other asset groups. In those circumstances, the asset group for that long-lived asset shall include all assets and liabilities of the entity. | ||
| 12 | Goodwill shall be included in an asset group to be tested for impairment only if the asset group is or includes a reporting unit. Goodwill shall not be included in a lower-level asset group that includes only part of a reporting unit. | ||
| 14 | An impairment loss for an asset group shall reduce only the carrying amounts of a long-lived asset or assets of the group. The loss shall be allocated...on a pro rata basis using the relative carrying amounts of those assets, except that the loss allocated to an individual asset shall not reduce the carrying amount of that asset below its fair value whenever fair value is determinable without undue cost and effort. | ||
| New Cost Basis | |||
| 15 | After the impairment is recognized, the reduced carrying amount shall be accounted for as the asset's new cost. | ||
| No restoration of a previously recognized impairment loss is allowed. | |||
| Estimates of Future Cash Flows Used to Test Recoverability | |||
| 17 | If alternative courses of action to recover the carrying amount of the asset are under consideration or if a range is estimated for the amount of possible future cash flows associated with the likely course of action, the likelihood of those possible outcomes shall be considered. A probability-weighted approach may be useful in considering the likelihood of those possible outcomes. | ||
| 18 | The remaining useful life of an asset group shall be based on the remaining useful life of the primary asset of the group. | ||
| The primary asset is the principal long-lived tangible asset being depreciated or intangible asset being amortized that is the most significant component asset from which the asset group derives its cash-flow-generating capacity. | |||
| Factors for determining whether an asset is the primary asset of the group: | |||
| a. | Whether other assets of the group would have been acquired...without the asset. | ||
| b. | The level of investment that would be required to replace the asset. | ||
| c. | The remaining useful life of the asset relative to other assets of the group. | ||
| If the primary asset is not the asset of the group with the longest remaining useful life, estimates of future cash flows for the group should assume the sale of the group at the end of the remaining useful life of the primary asset. | |||
| Fair Value | |||
| 22 | Fair value is the amount at which the asset could be bought or sold in a current transaction (other than in a forced or liquidation sale.) Quoted market prices are the best evidence of fair value...(When unavailable), the estimate of fair value shall be based on the best information available, including prices for similar assets and...other techniques. | ||
| A present value technique is often the best (way)...to estimate fair value... | |||
| Reporting | |||
| 25 | An impairment loss for assets to be held and used shall be reported as a component of income from continuing operations. | ||
| Disclosure | |||
| 26 | a. | a description of the impaired asset and reasons for the impairment | |
| b. | the amount of the impairment loss and the caption in the income statement . . . in which the impairment loss is aggregated | ||
| c. | how fair value was determined | ||
| d. | if applicable, the business segment or segments, affected | ||
| Assets to be Disposed Of | |||
| Recognition | |||
| 27 | (Assets to be disposed of other than by sale) shall continue to be classified as held and used until disposed of. | ||
| 28 | (An) asset to be abandoned is disposed of when it ceases to be used. | ||
| 29 | (Assets to be exchanged or distributed are) disposed of when exhanged or distributed. If...tested for recoverability while...classified as held and used, the estimates of future cash flows...shall be based on the use of the asset for its remaining useful life, assuming that the disposal transaction will not occur. | ||
| 30 | A long-lived asset to be sold shall be classified as held for sale in the period in which all of the following criteria are met: | ||
| a. | Management...commits to a plan to sell the asset. | ||
| b. | The asset...is available for immediate sale (under usual and customary terms). | ||
| c. | An active plan to locate a buyer...(has) been initiated. | ||
| d. | The sale of the asset is probable (and expected to be completed within one year, except as permitted by para 31). | ||
| e. | The asset is being actively marketed for sale...(at a reasonable price). | ||
| f. | ...It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. | ||
| If at any time the criteria...are no longer met...(the asset) shall be reclassified as held and used... | |||
| Measurement | |||
| 34 | A long-lived asset classified as held for sale shall be measured at the lower of its carrying amount or fair value less cost to sell. | ||
| 35 | Cost to sell an asset generally includes the incremental direct costs to transact the sale of the asset such as broker commissions, legal and title transfer fees, and closing costs. | ||
| These costs exclude expected future losses associated with the operations of a long-lived asset while it is classified as held for sale. If the sale is expected to occur beyond one year as permitted in limited situations by para 31, the cost to sell shall be discounted. | |||
| 37 | A loss shall be recognized for any initial or subsequent write-down to fair value less cost to sell. A gain shall be recognized for any subsequent increase in fair value less cost to sell (not to exceed the cumulative loss previously recognized). | ||
| Changes to a Plan of Sale | |||
| 38 | (If the decision is made not to sell the asset) the asset shall be reclassified as held and used at the lower of its: | ||
| a. | carrying amount before classified as held for sale adjusted for any depreciation(amortization) expense that whould have been recognized, or | ||
| b. | fair value at the date of the subsequent decision not to sell. | ||
| 39 | Any required adjustment to the carrying amount...(resulting from the reclassification) shall be included in income from continuing operations... | ||
| If a component of an entity is reclassified as held and used, the results of operations of the component previously reported in discontinued operations...shall be reclassified and included in income from continuing operations for all periods presented. | |||
| Reporting | |||
| 41 | A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. A component of an entity may be a reportable segment or an operating segment, a reporting unit, a subsidiary, or an asset group (as defined by para 4). | ||
| 42 | The results of operations of a component of an entity that either has been disposed of or is classified as held for sale shall be reported in discontinued operations...if both of the following conditions are met: | ||
| a. | The operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction, and | ||
| b. | The entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. | ||
| 43 | In a period in which a component...has been disposed of or is classified as held for sale, the income statement...shall report the results of operations of the component, including any gain or loss recognized in accordance with para 37, in discontinued operations. | ||
| The result of operations...shall be reported...in the period(s) in which they occur. | |||
| The results of discontinued operations, less applicable income taxes (benefit), shall be reported as a separate component of income before extraordinary items and the cumulative effect of accounting changes. | |||
| A gain or loss recognized on the disposal shall be disclosed either on the face of the income statement or in the notes to the financial statements. | |||
| 46 | A gain or loss recognized for a long-lived asset classified as held for sale that is not a component of an entity shall be included in income from continuing operations... | ||
| Disclosures | |||
| 47 | a. | A description of assets to be disposed of, facts and circumstance leading to the expected disposal, the expected manner and timing of that disposal, and the carrying amount of the asset. | |
| b. | The gain or loss recognized in accordance with para 37 and...the caption in the income statement...that includes that gain or loss. | ||
| c. | If applicable, amounts of revenue and pretax profit or loss reported in discontinued operations. | ||
| d. | If applicable, the business segment(s) in which assets to be disposed of are held. | ||
| 48 | (If applicable), a description of the facts and circumstances leading to the decision to change the plan to sell the ...asset and its effect on the results of operations for the period and any prior periods presented shall be disclosed in the notes to the financial statements... | ||