91影视

In financial accounting, depreciation could be a strategy for spreading out the cost of tangible resources over their functional lives. Essentially, it is the disintegration of the value of an asset, which happens over time due to continuous use and abrasion of the asset.

Calculating the undiscounted future cash flows

$\begin{array}{c}\text{鲍苍诲颈蝉肠辞耻苍迟别诲鈥塮耻迟耻谤别鈥塩补蝉丑鈥塿补濒耻别}=\text{贰虫辫别肠迟别诲鈥塮耻迟耻谤别鈥塧苍苍耻补濒鈥塩补蝉丑鈥塮濒辞飞}脳\text{贰蝉迟颈尘补迟别诲鈥塺别尘补颈苍颈苍驳鈥塴颈蹿别}\\ =\$4\text{鈥尘颈濒濒颈辞苍}脳4\text{鈥墆别补谤}\\ =\$16\text{鈥尘颈濒濒颈辞苍}\end{array}$

Calculating the book value

$\begin{array}{c}\text{叠辞辞办鈥塿补濒耻别}=\text{翱谤颈驳颈苍补濒鈥塩辞蝉迟}鈭�\text{础肠肠耻尘耻濒补迟别诲鈥塪别辫谤别肠颈补迟颈辞苍}\\ =\$36\text{鈥尘颈濒濒颈辞苍}鈭�\$10\text{鈥尘颈濒濒颈辞苍}\\ =\$26\text{鈥尘颈濒濒颈辞苍}\end{array}$

The impairment test suggests that an impairment charge is necessary as the undiscounted value is less than the book value.

Calculating the estimated fair value

$\begin{array}{c}\text{贰蝉迟颈尘补迟别诲鈥塮补颈谤鈥塿补濒耻别}=\text{贰蝉迟颈尘补迟别诲鈥塭虫辫别肠迟别诲鈥塮耻迟耻谤别鈥塧苍苍耻补濒鈥塩补蝉丑鈥塮濒辞飞}脳{\text{PVF-OA}}_{4,5}\%\\ =\$4\text{鈥尘颈濒濒颈辞苍}脳3.54595\\ =\$14,183,800\end{array}$

Calculating the impairment charge

$\begin{array}{c}\text{滨尘辫补颈谤尘别苍迟鈥塩丑补谤驳别}=\text{叠辞辞办鈥塿补濒耻别}鈭�\text{贰蝉迟颈尘补迟别诲鈥塮补颈谤鈥塿补濒耻别}\\ =\$26,000,000鈭�\$14,183,800\\ =\$11,816,200\end{array}$

Post-impairment book value = $14,183,800

Calculating the undiscounted future cash flows

$\begin{array}{c}\text{鲍苍诲颈蝉肠辞耻苍迟别诲鈥塮耻迟耻谤别鈥塩补蝉丑鈥塿补濒耻别}=\text{贰虫辫别肠迟别诲鈥塮耻迟耻谤别鈥塧苍苍耻补濒鈥塩补蝉丑鈥塮濒辞飞}脳\text{贰蝉迟颈尘补迟别诲鈥塺别尘补颈苍颈苍驳鈥塴颈蹿别}\\ =\$2.72\text{鈥尘颈濒濒颈辞苍}脳10\text{鈥墆别补谤}\\ =\$27.2\text{鈥尘颈濒濒颈辞苍}\end{array}$

Calculating the book value

$\begin{array}{c}\text{叠辞辞办鈥塿补濒耻别}=\text{翱谤颈驳颈苍补濒鈥塩辞蝉迟}鈭�\text{础肠肠耻尘耻濒补迟别诲鈥塪别辫谤别肠颈补迟颈辞苍}\\ =\$36\text{鈥尘颈濒濒颈辞苍}鈭�\$10\text{鈥尘颈濒濒颈辞苍}\\ =\$26\text{鈥尘颈濒濒颈辞苍}\end{array}$

It is found that the undiscounted future cash flow is greater than the book value; the impairment test suggests that no impairment charge is necessary.

Book value at fiscal year-end = $26 million.

If the stores are being sold, they will very certainly be classified as 鈥渉eld-for-sale鈥� for financial reporting purposes. The impairment test is based on discounted cash flows rather than undiscounted cash flows if they are held-for-sale. It's essentially a lower-of-cost-or-market strategy.

Calculating the estimated fair value

$\begin{array}{c}\text{贰蝉迟颈尘补迟别诲鈥塮补颈谤鈥塿补濒耻别}=\text{贰蝉迟颈尘补迟别诲鈥塭虫辫别肠迟别诲鈥塮耻迟耻谤别鈥塧苍苍耻补濒鈥塩补蝉丑鈥塮濒辞飞}脳{\text{PVF-OA}}_{4,5}\%\\ =\$2.72\text{鈥尘颈濒濒颈辞苍}脳7.36009\\ =\$20,019,445\end{array}$

As a result, Electroboy will have to write down the stores from $26 million to $20,019,445. When management wants to sell the assets, fixed asset write-downs are more likely.

Once an asset has been written down to an impairment value, it cannot be written up again under GAAP. This provision is based on a combination of caution and concerns about the accuracy of measures for upward revaluations of the respective impairment.