Chapter 2 — Long-Lived Assets Classified as Held and Used

2.1 Overview

ASC 360-10

35-15 There are unique requirements of accounting for the impairment or disposal of long-lived assets to be held and used or to be disposed of. Although this guidance deals with matters which may lead to the ultimate disposition of assets, it is included in this Subsection because it describes the measurement and classification of assets to be held and used and assets held for disposal before actual disposition and derecognition. See the Impairment or Disposal of Long-Lived Assets Subsection of Section 360-10-40 for a discussion of assets or asset groups for which disposition has taken place in an exchange or distribution to owners.

Long-lived assets within the scope of ASC 360-10 are accounted for and tested for impairment differently depending on the entity’s intent with regard to the assets. Long-lived assets classified as held and used are those that the entity intends to recover through use. Long-lived assets the entity intends to recover through sale are classified as held and used until the held-for-sale classification criteria are met (Chapter 3). Long-lived assets the entity intends to dispose of other than by sale are classified as held and used until they are disposed of (Chapter 4).

ASC 360-10 contains a specific framework for accounting for long-lived assets classified as held and used. Under ASC 360-10-35-21, long-lived assets that are classified as held and used “shall be tested for recoverability whenever events or changes in circumstances indicate that [their] carrying amount may not be recoverable.” In addition, ASC 360-10-35-23 states that such assets “shall be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.”

In accordance with ASC 360-10-35-17, a long-lived asset (asset group) is not recoverable if its carrying amount “exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group).” When a long-lived asset (asset group) is not recoverable, it is necessary to determine its fair value since “[a]n impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.”

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.