Process for Impairment of asset

Question

Hi,
Please expalin me the process for impairment of asset. my client want to perform impairment process for one of the assets.
Thanks&Regards,
Bhaskar Suruvu

Answer 1

Hi,
In some countries, it is legally required that companies calculate depreciation after asset impairment. To do this, you have to use specific depreciation rates and base values that are contained in a special formula. The localization of the New Depreciation Engine for these countries implements this formula and enables you to calculate asset depreciation after impairment postings have been made, in accordance with the requirements. The following depreciation keys are delivered for this purpose:
Depreciation Key                                                                                Description
IDB                                                         Declining balance method for impairment with 5% scrap value
IDM                                                        Declining balance method for impairment with 0% scrap value
ILI                                                          Straight-line method for impairment with 0% scrap value
ILT                                                         Straight-line method for impairment with 5% scrap value
Features: Each depreciation key calculates depreciation using a specific formula, as follows:
●     Depreciation key IDB
Depreciation = Book value after impairment * Rate     
where Rate is calculated as: 1 - (( Remaining Value / Book value after impairment )1/Remining useful life).
Depreciation is calculated in the following years based on the net book value of an asset.
●     Depreciation key IDM
Depreciation in the year of impairment = Book value after impairment * Rate * 10/9 
where Rate is calculated as: 1 u2013 0.11/Remining useful life.
Depreciation in the following years = Remaining depreciable value * Rate * 10/9 
where Remaining depreciable value is calculated as: book value after impairment * ( 1 u2013 Rate ) past years.
●     Depreciation key ILI
Depreciation = Book value after impairment * 1 / n     
where n is remaining useful life.
●     Depreciation key ILT
Depreciation = ( Book value after impairment u2013 remaining value ) * 1 / n     
where n is remaining useful life.
Hope this helps.
Rgds
Manish