Enjoyed this video? Then subscribe to the channel, and let's dive into one of the most common asset impairments: bad debt accounting ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-q7Whr_A4drE.html
Thank you for the kind words, Jacob!!! I like putting things in perspective. :-) I do have separate videos on goodwill ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-yq9qjCmUfS4.html as well as the broader topic of intangible assets ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE--TzaG-VD2GU.html Enjoy!
Happy to help! I want to get the basic idea across to as many people as possible, and then build on that with the more technical aspects of each of the asset impairment risks.
Agree! I am thinking of doing a webinar on the asset impairments in the oil and gas industry, as soon as the quarterly earnings releases for those companies are published.
@@TheFinanceStoryteller Nice! Been actually doing impairment assessments for clients in the tourism and entertainment industry. Strong indicators of impairment in their assets this year because of the situation.
Wow. That must be tough as well as fascinating! I bet that on one hand there might be a few companies that take a "big bath" approach, i.e. "if we have a bad year anyway, let's clear out all possible bad news in one go". On the other hand, there may be companies that resist impairments for as long as they can.
thanks as always for this great contribution to the community , an issue that I wonder, is in case of sale of an asset for a value higher than the existing book, for example a machine or an airplane, as you reflected in the financial statements? and where? sorry for asking toomuch questions, and value if you can attend them thanks in advance,
Good question! Debit cash (on the balance sheet) for the amount received, debit all accumulated depreciation (contra account on the balance sheet), credit the fixed asset (balance sheet), and credit the gain on sale of asset account (income statement). From my experience, this "gain on sale of asset" income statement account either rolls up into the overall depreciation category (as a "negative depreciation cost"), or flows into "other (non-operating) income". Here's a short video explaining contra accounts: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-ixkdvOT7ZDI.html
@@TheFinanceStoryteller thanks for your answer, I see in AERCAP, global leader in avitation, how they sell airplanes after 6-8 years, for more than the book value, then you can see in cash flows statement "gain on disposal of assets" with negative sign
Thank you 🙂The video is part of the balance sheet playlist, where I go through some case studies of balance sheets (Walmart, Tesla, Apple) as well as discuss various items in assets as well as liabilities and equity. Have a look if there are any more useful videos for you in there: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-eIjCaeNm-Vk.html&pp=gAQBiAQB
Hello, thanks for your video! I am preparing a presentation where I have to explain the asset impairment (an impairment loss on inventories) I would like to do a Journal Entry, is it right to Debit Impairement loss and to Credit the Inventory? Other sides have never described how to do it with Inventories :/ Or can we Debit Cost of Goods Sold and Credit Inventory? I am analyzing a balance sheet, where they have used the IFRS standards? And if there is a revearsal? So after the impairment, the recoverable amount of the asset increases again, for example if the demand for a specific product is rising? How could we use a Journal Entry then to describe the transaction? Btw nice video :) I am looking forward to your reply :)
Thank you for the kind words! What is the reason for the inventory impairment? Obsolescence? I would debit Cost Of Goods Sold, and credit Inventory. Or more specifically within those very broad categories debit Inventory Obsolescence expense (P&L), credit Inventory Obsolescence (balance sheet contra-asset account). As for the reversal, let me read up on that part and get back to you.
I found some information in a PWC document on differences between US GAAP and IFRS. The way I read/interpret it, is that US GAAP prohibits reversal of impairments, while under IFRS if certain criteria are met, the reversal of impairments, other than those of goodwill, is permitted. I think you have a very interesting assignment to analyze an annual report for such a high-visibility case! Here are two videos that could help you: how to read an annual report ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-Kw-1nopchnA.html and US GAAP vs IFRS ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-7B96MhOGaqE.html I am not completely sure what the correct journal entries would be, but would advise you to be as specific as possible as expenses always have to roll up into a certain part of the P&L (COGS, SG&A, R&D, Interest/Taxes). In the case of impairment losses on intangible assets and PP&E, I would personally go for a debit in "Depreciation of PPE and amortization of IA" (expense). For the lease assets, I would have the credit of the reversal go through current year income rather than OCI. But I could be wrong on both of these! Up to you to review and decide.
You're welcome, Randi! Very nice to hear that. And yes, most of the topics on the Finance Storyteller channel are really simple, when you bring them down to the "essence".
