As the CFO of a company, what indicators would you look at to assess whether your firm's long-term assets were impaired? What approaches could be used, either by management or an independent valuation firm, to assess the dollar value of any asset impairment? As a financial analyst, what indicators would you look at to assess whether a firm's long-term assets were impaired? What questions would you raise with the firm's CFO about any charges taken for asset impairment?
As the Chief Financial Officer (CFO) of a company, what indicators would you look at to assess whether your firm's long-term assets were impaired?
The IAS 36 standards require that tests for asset impairments be conducted in order to determine where the assets may be impaired. The standard provides various indicators that are used to assess whether the firm's long term assets are impaired. These indicators are: significant changes to the legal, technological economic and market conditions and environments within which the company operates or within the market area within which the asset is used, and a drop in the market capitalization of the company which would likely imply that the overall carrying values of assets in the company exceeds the perceived value of the entire company. Other indicators include specific evidence of damage or obsolescence of assets, internal financial reporting showing a continuously worse off economic performance of the asset and when there have been significant changes in the internal environment of the company such as restructurings, or product discontinuations in such a ...
The solution assesses a firm's long-term assets to see if they were impaired.