Master Asset Impairment & Valuation Fast! | CFA Level 1 | Amquest Education

Understanding Impairment of Long-Lived Assets is essential for evaluating corporate performance, analyzing financial statements and identifying changes in asset value over time.
In this lecture from Amquest Education’s CFA Level I – Financial Statement Analysis (FSA) series, we break down how impairment is recognized, how recoverable amount is measured and why companies must assess assets for a potential decline in value.

This session simplifies the key issues related to long-term assets including initial cost recognition, cost allocation through depreciation/amortization and assessing whether an asset’s carrying value exceeds the amount it can recover. You’ll also understand the differences between IFRS and US GAAP when it comes to recognizing and reversing impairment.

What You’ll Learn in This Lecture

• What counts as a long-lived asset and why impairment matters
• Difference between debt securities (as investments) vs debt as a liability
• Key issues for long-term assets:
 – Determining initial cost
 – Allocating cost over time (depreciation/amortization)
 – Accounting for further costs (capitalizing vs expensing)
• What impairment means and how to identify it
• The concept of recoverable amount
 – Fair value minus selling cost
 – Value in use (present value of future cash flows)
• When impairment must be recorded
• Why assets may suddenly lose value due to technological or economic change
• IFRS vs US GAAP:
 – IFRS allows reversal of impairment (except goodwill)
 – US GAAP prohibits reversal
• How impairment affects financial statements and valuation

This lecture prepares CFA candidates to handle impairment-related questions in FSA and understand how declining asset value impacts profitability and ratios.

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