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FAS 144 - Impairment StudiesFAS 141 and 142 - Impairment StudiesFAS 133 - Embedded Derivatives FAS 123R - Options The Financial Accounting Standards Board approved the issuance of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Statement supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. However, the Statement retains the fundamental provisions of Statement 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. The Statement supersedes the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in that Opinion). The Statement also amends ARB No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. FAS 144 applies to recognized long-lived assets to be held and used or to be disposed of. For long-lived assets to be held and used, a group represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. For purposes of FAS 144, impairment is the condition that exists when the carrying amount of a long-lived asset (asset group) exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, whether in use or under development. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. A long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Eagle has had a current-period operating and cash flow losses combined with a history of operating and cash flow losses which indicates the need to test for recoverability. For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets shall be grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. Goodwill shall be included in an asset group to be tested for impairment under this Statement only if the asset group is or includes a reporting unit. Goodwill is not included in lower-level asset groups that include only part of a reporting unit. An impairment loss for an asset group shall reduce only the carrying amounts of a long-lived asset or assets of the group. The loss shall be allocated to the long-lived assets of the group on a pro-rata basis using the relative carrying amounts of those assets, except that the loss allocated to an individual long-lived asset of the group shall not reduce the carrying amount of that asset below its fair value. If an impairment is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Herrera Partners has a thorough understanding of these standards. |
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