Accounting for Property, Plant, and Equipment (PP&E) can usually be relatively straight forward: The asset is recorded at cost when purchased and then depreciated over its useful life. But what happens if the carrying value of PP&E is not recoverable? What if the asset becomes impaired? What is impairment and how is it determined? ASC Topic, 360, Property, Plant, and Equipment covers the accounting for PP&E and addresses some of these questions. This post discusses the specifics of accounting for impairment of PP&E.

The carrying amount of property, plant, and equipment (property) is usually its historical cost net of accumulated depreciation. During the life of an asset there may be conditions or events that indicate that the carrying value of an asset is not recoverable which may result in the impairment of the carrying amount. The carrying value of property is not recoverable when it exceeds the un-discounted cash flows of the property (or asset group). The carrying value of property is impaired when it exceeds the property’s fair value. When this occurs, US GAAP requires that the property’s carrying value is written down to its fair value and that an impairment loss is recognized.

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