Impairment on Impairment Accounts

	It is MANDATORY that you calculate depreciation to impairment date before entering impairment to assess correct carrying amount and with it the difference to the new value.
	If a fixed asset's value has been revaluated before impairment (see type 4 - Downward reval. on downward reval. accounts), it is required that you remove upward revaluation (see type 7 - Reversal of downward revaluation).

When fixed asset's book value exceeds its recoverable amount, in accordance with the SAS (2002) 1.29, a special revaluation of tangible fixed assets MUST be performed. Furthermore, recoverable amount is net disposable value or value in use. That is, it depends on which is higher. Such depletion represents a loss because of impairment and is shown as revaluation operating expense (e.g. 720D), and not as increased depreciation cost.

Depreciating impairment (see 23 - Depreciation on downward reval. accounts) is a decreased depreciation cost (accounts group 43).

Example:

The value of a fixed asset purchased on June 15th, 2007 is on August 31st, 2007 estimated on €400,000 by an appraiser. A 20% depreciation rate is applied. The supplier invoices you for €500,000:

First you have to calculate depreciation till August 31st, 2007 in order to establish the book value, that is, the carrying amount on:

When automatically calculating the amount, you only need to decrease carrying amount by 83,333.34 in the Fixed Assets register. Proceed by

selecting Calculate from the right-click menu, confirm the calculation and post revaluated amount. 

You can proceed by recording calculated amounts (manually or by selecting the corresponding function). Then post the line by clicking Post Value Adjustment.

Of course you can calculate cost and adjustment manually, enter them in the register and select type 5 - Downward reval. on downward reval. accounts. Proceed by posting the line by selecting Post Value Adjustment. (For detailed treatment see Calculating Upward Revaluation and Impairment).

Then establish the required percentage of increment of cost and write-off value.

• The carrying amount according to accounting records is: €5.800,00
• Appraiser's estimated value: €400,000.00
• Difference: -€966,57
• Difference factor between estimate/shown: €400,000/483,333.34 = 0.82758621
• Decrement factor: 0.82758621 - 1 = -0.17241379

1. Cost decrease on impaired acquisition accounts: 500,000 * -0.17241379 = -86,206.89
2. Adjustment value increase on revaluated adjustment accounts: 16,666.67 * -0.17241379 = -2,873.56

Below you can observe lines of journal entry:

For transparency sake we manually calculated the revaluated amounts and entered them subsequently. To directly calculate upward revaluation and post the amount you can use Calculate function in the right-click menu (see Calculating Upward Revaluation and Impairment).