Previously, we discussed in regards to the purpose of IAS 36- Impairment of Assets and all other connected subjects. We are going to proceed additional around the accounting entries of impairment. Frequently, upon recognition of impairment loss, the following entries should really be passed:
Debit Impairment Loss (Profit & Loss)
Credit Provision for Dimunition in Value (Balance Sheet)
Provision for Dimunition in Value is a contra account to the existing asset account. For instance, the contra account of Stocks, in such cases, is Provision for Stocks Obsolescence. The Provision for Dimunition in Value has properly given away the impact of impairment around the existing asset, that could be useful to financial statement users.
Recognition of impairment Loss
Carrying amount of asset (book value) is greater than undiscounted future cash flows related to use and disposal of asset
To paraphrase, the carrying value is not recoverableKeep in mind that an impairment can exist (that is, carrying value can be less than fair value) but it is not really recognized as long as the future cash flows (undiscounted) are above the carrying value
Recognition of impairment Loss
Carrying amount of asset (book value) is greater than undiscounted future cash flows related to use and disposal of asset
To paraphrase, the carrying value is not recoverableKeep in mind that an impairment can exist (that is, carrying value can be less than fair value) but it is not really recognized as long as the future cash flows (undiscounted) are above the carrying value
