2.9 Presentation of an Impairment Loss
ASC 360-10
Presentation of Impairment Loss for Long-Lived Assets
to Be Held and Used
45-4
An impairment loss recognized for a long-lived asset (asset
group) to be held and used shall be included in income from
continuing operations before income taxes in the income
statement of a business entity. If a subtotal such as income
from operations is presented, it shall include the amount of
that loss.
ASC 360-10-45-4 provides guidance on presentation of an impairment loss. An entity
must present an impairment loss recognized for a long-lived asset (asset group) in
income from continuing operations. If, instead of income before income taxes, the
entity presents a similar subtotal, such as income from operations or operating
income, it should include the impairment loss. The entity may present an impairment
loss as a separate line item in income from continuing operations to meet the
disclosure requirement in ASC 360-10-50-2.
Connecting the Dots
As described in ASC 360-10-35-4, depreciation is a “system of accounting
which aims to distribute the cost or other basic value of tangible capital
assets, less salvage (if any), over the estimated useful life of the [asset]
in a systematic and rational manner. It is a process of allocation, not of
valuation.” As a result, impairment losses should not be recognized in
depreciation or amortization expense.
ASC 360-10-40-3A through 3C describe the guidance an entity should apply to
derecognize an asset (asset group) that represents a (1) nonfinancial asset or (2)
business:
40-3A An entity shall account for the derecognition of a
nonfinancial asset, including an in substance nonfinancial asset and an asset
subject to a lease, within the scope of this Topic in accordance with Subtopic
610-20 on gains and losses from the derecognition of nonfinancial assets, unless
a scope exception from Subtopic 610-20 applies. For example, the derecognition
of a nonfinancial asset in a contract with a customer shall be accounted for in
accordance with Topic 606 on revenue from contracts with customers.
40-3B An entity shall account for the derecognition of a
subsidiary or group of assets that is either a business or nonprofit activity in
accordance with the derecognition guidance in Subtopic 810-10.
40-3C If an entity transfers a nonfinancial asset in
accordance with paragraph 360-10-40-3A, and the contract does not meet all of
the criteria in paragraph 606-10-25-1, the entity shall not derecognize the
nonfinancial asset and shall follow the guidance in paragraphs 606-10-25-6
through 25-8 to determine if and when the contract subsequently meets all the
criteria in paragraph 606-10-25-1. Until all the criteria in paragraph
606-10-25-1 are met, the entity shall continue to do all of the following:
- Report the nonfinancial asset in its financial statements
- Recognize depreciation expense as a period cost unless the assets have been classified as held for sale in accordance with paragraphs 360-10-45-9 through 45-10
- Apply the impairment guidance in Section 360-10-35.
For additional guidance on accounting for a sale of nonfinancial
assets, see Deloitte’s Roadmap Revenue Recognition.