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Determine the amount of impairment according to SFAS

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Reference no: EM132637473

Question - Assets A, B, and C constitute an asset group. Asset B is considered to be the principal asset in this group. Asset B has a three-year estimated life and A and C have remaining lives of four years. Data on the expected undiscounted cash flows of the three assets, their book values (carrying values), and their fair values less costs to dispose are shown below:

Undiscounted cash flows by year

A

B

C

1

$18,000

$80,000

$12,000

2

15,000

70,000

10,000

3

12,000

65,000

9,000

4

10,000

 

6,000

Book value

$60,000

$220,000

$20,000

Fair value less disposal costs

$65,000

$18,000

$25,000

Required -

1. Determine the amount of impairment according to SFAS Nos. 121 and 144.

2. What is the amount that each of the assets should be written down?

3. What theoretical problems do you see with the application of SFAS Nos. 121 and 144 to asset impairments?

Reference no: EM132637473

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