Impairment loss
Use this function to manage impairment losses that the company can define for an asset.
An impairment loss corresponds to a loss of value that adds up to the one observed in the depreciation process.
It can be observed in the plans managed based on the IAS/IFRS and CRC2002-10 standards and applies to the current period end values of the considered plan.
It can be justified by internal reasons (obsolete or damaged asset, planned reconstruction, ...) or by external reasons (reduction in the market value of an asset, technological evolution,...).
These loss of value indexes are reversible: an impairment loss can therefore be totally or partially reversed... without leading to an accounting value greater than the one which would have been determined had the asset not been impaired.
It is always performed on a plan managed in compliance with the IAS/IFRS standard or the CRC2002-10 standard.
Notes:
- The impairment loss of an asset assigned to a TGU is not authorized in this screen, the impairment loss MUST be carried out by the mass impairment loss process for all the assets that make up this TGU.
- This action only allows the impairment of assets with the autonomous status. The impairment loss of a main asset and its components is not authorized in this screen: in this case, the main asset and its components must be linked to the same TGU and the impairment loss must be carried out by the mass Impairment loss process.
Write-off
An impairment loss takes place when the net value of the asset, at the end of the period (or the fiscal year) becomes greater than its recoverable value.
The recovery value corresponds to the highest of the two following values:
- Market value,
- Usage Value.
Impairment loss reversal
An impairment loss reversal is established when the asset has been impaired during the previous periods or fiscal years and that its net value, at the end of the period (or the fiscal year), has become less than its recoverable value.
An impairment loss reversal is also determined automatically in the two following cases:
- When issuing an asset with an impairment loss balance on the issue date: there is automatically an impairment loss reversal during the calculation following the disposal, as the IMLRVEISS parameter (Disposal: Impairment loss reversal has value Yes.
- During the periodic calculation of a plan managed in compliance with the CRC2002-10 standard, when an impairment loss reversal occurred on this plan during the FY. In this case, an impairment loss reversal is recorded and transferred automatically into an exceptional depreciation in the last period of the FY or in the disposal period if an asset disposal is recorded in a previous period.
No impairment loss reversal is performed for type Goodwill assets.
- to determine an impairment loss or any impairment loss reversal,
- consecutively, to update the depreciation plan value involved in the impairment loss or reversal.
- to generate the events required for the production of the account postings for an impairment loss or reversal.
This function is also used to:
- cancel the impairment loss or the reversal carried out in the current period. Several impairment losses/reversals in the same period (or in the same fiscal year if the period ends are not managed) are not authorized, before proceeding with a new impairment loss or reversal, the user actually needs to cancel the previous impairment loss/reversal.
This window can be called from the Assets management function in two different ways:
- either from the Actions menu. It is then required to choose a plan managed in compliance with the IAS/IFRS or the CRC2002-10 standard, from the list of depreciation plans managed by the company of the asset.
- or using the tab Depreciation, by right-clicking on option Impair, accessed from one of the lines corresponding to a plan managed according to the IAS/IFRS standard or CRC2002-10 standard.
Notes:
1/ An impairment loss or impairment loss reversal is recorded at the end of the current period, after depreciation calculations for the period or fiscal year. As a result, the impairment loss/reversal process is only authorized after a periodic calculation (or fiscal year) for the company.
2/ The impairment loss is prohibited if the asset meets at least one of the following requirements:
- It is Inactive.
- Its holding type is In template or in concession.
- It is classified as for sale.
- It has been the object of an actual asset disposal or cancellation.
- It is in the process of an intra-group sale.
- The asset depreciation start date, for the selected plan, is greater than the end date of the current period.
It is also prohibited on the selected plan:
- If this plan is not managed in compliance with the IAS/IFRS standard or the CRC2002-10 standard.
- If the asset has already been subject to a revaluation in the same period.
- If the asset has already been subject to an impairment loss or reversal in the same period. Before proceeding to a new impairment loss/reversal, it is necessary to cancel the previous impairment loss/reversal.
Prerequisites
Refer to documentation Implementation
Screen management
This function consists of a tab that is used to enter the impairment loss/increase process setups.
Management of the window
The management mode is the same for this window as for all the actions that can be applied to assets.
It is therefore advisable:
- Either to directly confirm the entry of the parameters by clicking OK. The impairment loss calculation is carried out directly on the selected asset.
- Or to pass by an intermediate stage - control on the parameters entered and the values calculated - by clicking Check.
A window is displayed with the following information:
- Company in which the asset is referenced
- Asset reference and description
- Ex-tax receipt value (CoA or IFRS)
- Net value before impairment loss/reversal
- Impairment
- Impairment loss reversal
- Net value before impairment loss/reversal
- Reversal limit
- Market value
- Effective start date.
Click Cancel to close the control window; the parameter entry window is displayed again in order to:
- either validate the update by clicking OK, and then return to modification mode on the Assets screen. The processing is taken into account only after saving the asset.
- or cancel the update by clicking Cancel.
Header
The header displays the reference as well as the asset description from which the impairment loss action is called. This information cannot be modified.
Asset
| Reference (field OBJREF) |
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Reference for the financial asset. |
| Description (field OBJDES) |
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Description of the financial asset. |
Tab Setup definition
This tab:
- Specifies the Depreciation plan to which the processing is applied. It must be entered when the window is called from the Actions menu in the Assets screen. This plan must be managed according to the IAS/IFRS or CRC2002-10 standards. It cannot be the subsidy plan. It is automatically entered and cannot be modified when the window is called from a line of a Depreciation plan of the screen Fixed assets.
- Recalls the start and end dates of the current Fiscal year and current Period if the fiscal year is divided into periods, within the context of the entered plan.
- Used to carry out an impairment loss/reversal or to request the cancellation of an impairment loss/reversal carried out in the current period.
UGT
| UGT (field IASCGU) |
|
Help common to the single and mass depreciation processes. This field can only be accessed in a mass process. It is used to specify the treasury generating unit involved in the depreciation. If a company is selected, the list only displays the UGT with at least one asset belonging to the company. |
Asset
| Reference (field AASREF) |
|
Help common to the single and mass depreciation processes. This field in unitary process displays the reference for the asset for which the depreciation will be carried out. In the mass process, this field is empty and cannot be entered. |
Plan
| Plan (field DPRPLN) |
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Help common to the single and mass depreciation processes. |
| Fiscal year start (field DATSTRFIY) |
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This field , non modifiable, displays the financial year start date of the context which the plan belongs to. |
| Fiscal year end (field DATENDFIY) |
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This field, that cannot be modified, includes the fiscal year end date of the context to which the plan belongs. |
| Currency (field CUR) |
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This field, non modifiable, displays the management currency of the context which the plan belongs to. |
| Period start (field DATSTRPER) |
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This field displays the current period start date. |
| Period end (field DATENDPER) |
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This field displays the current period end date. |
Parameters
| Cancel impairment loss (field IMLANNFLG) |
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Help common to the single and mass depreciation processes. |
| Effective date (field DATEFF) |
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This field, non modifiable, displays the effective date of the depreciation method. This date necessarily corresponds to the end date of the current period. |
| Impairment loss type (field IMLTYP) |
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The impairment loss type is mandatory. This information is stored in the impairment loss event and taken into account upon posting of the event. It is used with the parameters of the automatic journals to select the expense and income accounts on which movements must be carried out. Those accounts vary according to the type of impairment loss.
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| Intern.reason (field INTIMLTYP) |
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This field enables the user to enter the internal reason explaining the depreciation or depreciation recovery. This field cannot be filled during the depreciation cancellation. |
| External reason (field EXTIMLTYP) |
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This field enables the user to fill the external reason explaining the depreciation or depreciation increase. This field cannot be filled during the depreciation cancellation. |
| Market value (field NSPVAL) |
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Help common to the single and mass depreciation processes. |
| Recoverable value (field RCOVAL) |
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Help common to the single and mass depreciation processes. |
| Usage value (field USEVAL) |
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Help common to the single and mass depreciation processes. |
| Net value (field NBV) |
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Help common to the single and mass depreciation processes. |
| Impairment (field IML) |
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Help common to the single and mass depreciation processes. |
| Impairment loss reversal (field IMLRVE) |
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Help common to the single and mass depreciation processes. |
| Impairment loss reversal balance (field IMLRVEBLC) |
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Help common to the single and mass depreciation processes. |
| Reversal cap (field IMLRVELIM) |
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Help common to the single and mass depreciation processes. |
Impairment loss/reversal
To carry out an impairment loss/reversal, the user needs to enter the following parameters:
- Internal reason and/or external reason justifying the impairment loss or impairment loss reversal.
- Market value and/or Usage value. These values will be used to determine the Recoverable value that corresponds to the largest of the two. The entry of at least one of the two values is therefore mandatory.
Note: the Market value field displays by default any value assigned in the Market value option window accessible from the Assets management function. This value can be modified.
Other information is presented in the screen, it cannot be modified:
- Effective date: this field is automatically loaded with the end date of the current fiscal year or with the end date of the current period when the fiscal year is sub-divided into periods.
- Net book value.
This field is not assigned when an impairment loss or reversal has already taken place for the period or fiscal year.
-Impairment loss. This field is loaded automatically after determining the recoverable amount, based on the impairment loss amount of the period (or fiscal year). This amount corresponds to the result of the following calculation:
Net Value of the asset at period end - Recoverable amount only if the net value of the asset is greater than its recoverable amount.
In the opposite case the impairment loss amount is equal to: 0.
This field is not entered during the cancellation of an impairment loss.
- Impairment loss reversal. This field is automatically loaded after the recoverable value has been determined. It contains, if it exists, the impairment loss reversal amount for the period. It can only be entered if an impairment loss has already been carried out in one of the previous periods. This amount corresponds to the result of the following calculation:
Recoverable amount - Net Value of the asset at period end only if the recoverable amount of the asset is greater than its net value.
In the opposite case the Impairment loss reversal amount is equal to: 0.
This field is not entered during the cancellation of an impairment loss.
- Impairment loss reversal balance. This field is only entered in the case when the calculated impairment loss reversal amount cannot be assigned to the asset completely, because of its impairment loss reversal threshold.
This impairment loss reversal balance can be used as a revaluation for companies that have chosen this method: the revaluation is carried out either by individual processing or by the mass revaluation . processing.
This field is not entered during the cancellation of an impairment loss.
- Impairment loss limit. This field is only entered when an impairment loss has already been carried out in one of the previous periods.
This amount, automatically calculated, constitutes the limit applied in order not to obtain a Net value greater than that which would have been determined if the asset had not been impaired.
This amount corresponds to the result of the following calculation:
Theoretical net value at period start (the theoretical value does not take the impairment losses or increases into account) - Actual net value at period start (after impairment loss on previous periods).
This field is not entered during the cancellation of an impairment loss.
Description of the impairment loss processing
An impairment loss processing carries out the following operations:
- Entering, in the selected depreciation plan, the impairment loss amount (and the reversal limit) or the impairment loss reversal amount.
- Calculation of its new net value on period end.
Note: if this new net value is less than the residual value of the asset, a message prompts the user to confirm the impairment loss process. If it is accepted, the residual value will be replaced by the new net value at closing. If it is not accepted, the impairment loss process is aborted.
- Update of the asset and loading of the internal/external impairment loss reason and, if necessary, of the new Market value.
When it is modified the Market value is passed, at the level of the Market value options window, to each of the plans already carrying a market value and where the period end date (or fiscal year end date, if the fiscal year is not divided into periods) is identical to that in the plan involved by the process.
- Update of its Residual value (with the Net value of the asset, if this net value is less than the residual value before impairment loss).
- The impairment loss of an asset in non residual mode leads to a change in depreciation method that will automatically take the Equivalent residual method value. This change in method is used to process in a long-term fashion the impairment loss or impairment loss reversal, by depreciating the new net value over the residual depreciation duration.
- Generation of an Impairment loss event (FASIML) in case of impairment loss, or impairment loss reversal due to the disappearance or reduction of the value loss index for the asset:
- The operating effective date recorded in the EVTDAT field and the accounting effective date recorded in the CPTDATINT field receive the End date of the current period.
This event contains the information required for the production of accounting entries related to impairment losses and impairment loss reversals.
Notes:
- In case of an impairment loss reversal occurring during the issue of an asset with an impairment loss balance on issue date, the FASIML event is generated on asset disposal.
- When the impairment loss reversal is linked to an impairment loss on a plan managed in compliance with the CRC2002-10 standard, and transferred to exceptional depreciation (see below), no reversal event is generated. The values required for the posting of the impairment loss in the impairment loss account, are recorded in the DEPREC charge table.
- Generation of the accounting entry used to post the event, if the Entry type pertaining to this event is set up for an immediate posting of the event.
Impairment loss on a plan managed in compliance with the CRC2002-10 standard (generally speaking on the chart of accounts of a French company):
A impairment loss occurring on a plan managed in compliance with the CRC2002-10 standard is automatically accompanied by an impairment loss reversal calculated on the basis of the depreciation expense of the current FY. The amount of the impairment loss reversal corresponds to the difference between the amount of the theoretical FY expense (calculated without taking the impairment loss into account) and the amount of the actual FY expense.
This impairment loss reversal is automatically transferred to exceptional depreciation in each period of the FY or in the issue period if an asset issue is recorded in a period prior to the FY end.
The reversal and its transfer to exceptional charge are neutral regarding the net value:
- the impairment loss reversal increases the net value
- the exceptional depreciation charge reduces this net value by the same amount.
Note: An impairment loss on the Chart of accounts does not generate any Book vs. Tax depreciation. This depreciation is actually determined taking into account the theoretical accounting depreciation of the FY (and not the actual depreciation), i.e. taking into account all the depreciation charges: the "standard" charge to which the exceptional charge, caused by an impairment loss reversal or not (see examples 2 and 3 below), is added.
Examples
* Example 1:Impairment loss and increase limit
Asset depreciated over 5 years, where the initial balance sheet value is 1,000.
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Theoretical values |
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Actual values |
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Fiscal years |
Initial balance sheet value |
Charge |
Total |
Theoreticalnet value |
Impairm. |
Reversal limit |
Charge |
Total |
Actual net value |
|
1 |
1000 |
200 |
200 |
800 |
|
|
200 |
200 |
800 |
|
2 |
1000 |
200 |
400 |
600 |
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|
200 |
400 |
600 |
|
3 |
1000 |
200 |
600 |
400 |
300 |
|
200 |
600 |
100 |
|
4 |
1000 |
200 |
800 |
200 |
|
300 |
50 |
650 |
50 |
|
5 |
1000 |
200 |
1000 |
0 |
|
0 |
50 |
700 |
0 |
- Fiscal year end 3: impairment loss of 300
- Fiscal year 4: Theoretical NV without taking into account the impairment loss = 200
- Fiscal year 4: Theoretical NV taking into account the impairment loss = 50
The Impairment loss reversal limit for FY 4 equals : 400 – 100 = 300
In fact, if the Impairment loss reversal for the fiscal year 4 is greater than 150, it leads to an actual NV that is greater than that which it would have been if no impairment loss had taken place at the end of fiscal year 3.
* Example 2: Accounting and Fiscal depreciation plan, due to an impairment loss.
- Depreciation start date: 01/01/2002
- Asset value: 1,000
- Accounting method: linear over 10 years
- Fiscal method: linear over 10 years
- Current fiscal year: [01/01/2006 - 31/12/2006]
- On 12/31/2006, there is an impairment loss of 200
Depreciation plan Accounting :
|
Fiscal year |
Reval. |
Charge |
Total |
Write-off |
Transfer |
Impairm. balance |
NV |
|
2002 |
1,000 |
100 |
100 |
|
|
|
900 |
|
2003 |
1,000 |
100 |
200 |
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|
|
800 |
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2004 |
1,000 |
100 |
300 |
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|
|
700 |
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2005 |
1,000 |
100 |
400 |
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|
|
600 |
|
2006 |
1,000 |
100 |
500 |
200 |
|
200 |
300 |
|
2007 |
300 |
60 |
560 |
|
(1) 40 |
(3) 160 |
(2) 240 |
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2008 |
300 |
60 |
620 |
|
(1) 40 |
120 |
180 |
|
2009 |
300 |
60 |
680 |
|
(1) 40 |
80 |
120 |
|
2010 |
300 |
60 |
740 |
|
(1) 40 |
40 |
60 |
|
2011 |
300 |
60 |
800 |
|
(1) 40 |
0 |
0 |
(1) "Theoretical" charge - "actual" charge, i.e.: 100 - 60 = 40
(2) Net value after impairment loss - "actual" charge, i.e.: 300 - 60 = 240
(3) FY end impairment loss balance = FY start balance - Transfer, i.e.: 200 - 40 = 160
Depreciation plan Fiscal:
Fiscal year | Reval. | Charge | Total | NV | Exceptional provision | Exceptional reversal |
2002 | 1,000 | 100 | 100 | 900 | 0 | 0 |
2003 | 1,000 | 100 | 200 | 800 | 0 | 0 |
2004 | 1,000 | 100 | 300 | 700 | 0 | 0 |
2005 | 1,000 | 100 | 400 | 600 | 0 | 0 |
2006 | 1,000 | 100 | 500 | 500 | 0 | 0 |
2007 | 1,000 | 100 | 600 | 400 | 0 | 0 |
2008 | 1,000 | 100 | 700 | 300 | 0 | 0 |
2009 | 1,000 | 100 | 800 | 200 | 0 | 0 |
2010 | 1,000 | 100 | 900 | 100 | 0 | 0 |
2011 | 1,000 | 100 | 1,000 | 0 | 0 | 0 |
The fiscal depreciation plan is the same after the impairment loss recorded on the accounting depreciation plan.
No exceptional depreciation is generated.
* Example 3: Accounting and Fiscal depreciation plan, due to an impairment loss.
- Depreciation start date: 01/01/2002
- Asset value: 2,000
- Accounting method: linear over 10 years
- Fiscal method: linear over 8 years
- Current fiscal year: [01/01/2006 - 31/12/2006]
- On 12/31/2006, there is an impairment loss of 600
Depreciation plan Accounting :
Fiscal year | Reval. | Charge | Total | Write-off | Transfer | Impairm. balance | NV |
2002 | 2,000 | 200 | 200 |
|
|
| 1,800 |
2003 | 2,000 | 200 | 400 |
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|
| 1,600 |
2004 | 2,000 | 200 | 600 |
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|
| 1,400 |
2005 | 2,000 | 200 | 800 |
|
|
| 1,200 |
2006 | 2,000 | 200 | 1,000 | 600 |
| 600 | 400 |
2007 | 400 | 80 | 1,080 |
| (1) 120 | (3) 480 | (2) 320 |
2008 | 400 | 80 | 1,160 |
| (1) 120 | 360 | 240 |
2009 | 400 | 80 | 1,240 |
| (1) 120 | 240 | 160 |
2010 | 400 | 80 | 1,320 |
| (1) 120 | 120 | 80 |
2011 | 400 | 80 | 1,400 |
| (1) 120 | 0 | 0 |
(1) "Theoretical" charge - "actual" charge, i.e.: 200 - 80 = 120
(2) Net value after impairment loss - "actual" charge, i.e.: 400 - 80 = 320
(3) FY end impairment loss balance = FY start balance - Transfer, i.e.: 600 - 120 = 480
Depreciation plan Fiscal :
Fiscal year | Reval. | Charge | Total | NV | Exceptional provision | Exceptional reversal |
2002 | 2,000 | 250 | 250 | 1,750 | (4) 50 | 0 |
2003 | 2,000 | 250 | 500 | 1,500 | (4) 50 | 0 |
2004 | 2,000 | 250 | 750 | 1,250 | (4) 50 | 0 |
2005 | 2,000 | 250 | 1,000 | 1,000 | (4) 50 | 0 |
2006 | 2,000 | 250 | 1,250 | 750 | (4) 50 | 0 |
2007 | 2,000 | 250 | 1,500 | 500 | (4) 50 | 0 |
2008 | 2,000 | 250 | 1,750 | 250 | (4) 50 | 0 |
2009 | 2,000 | 250 | 2,000 | 0 | (4) 50 | 0 |
2010 | 2,000 | 0 | 2,000 | 0 | 0 | (4) 200 |
2011 | 2,000 | 0 | 2,000 | 0 | 0 | (4) 200 |
4) Fiscal charge - (Standard accounting charge "". + "exceptional" accounting charge) or fiscal charge - "theoretical" accounting charge.
Cancellation of impairment loss/reversal
An asset cannot be subject, during the current period, to more than one impairment loss/reversal in the same plan ; it is therefore necessary to cancel the impairment loss/reversal previously carried out before carrying out a new impairment loss/reversal.
If an impairment loss or reversal has already been carried out in the period, a message warns the user to proceed with the cancellation.
In this case, only the Cancel impairment loss flag can be accessed and activated.
This cancellation is possible as long as the fiscal year or period has not been closed.
It involves the re-initialization of the impairment loss or impairment loss reversal amount for the plan, and the creation of the cancellation events corresponding to the original events.
Description of the impairment loss/reversal cancellation processing
The cancellation process for the impairment loss/reversal leads to:
- Reinitialize to the zero the impairment loss or impairment loss reversal amount in the plan.
- the reassignment to their values prior to the impairment loss/reversal of the fields updated by the impairment loss processing (with the exception of the Market value, which keeps the value entered at the time of the impairment loss).
- the automatic switching back to the original method if the impairment loss has led to the mandatory change of the depreciation method to an equivalent residual method..
- the generation of an Impairment loss cancellation event (FASIML). The impairment loss or impairment loss cancellation events have the same contents, the event type only is used to distinguish them.
The user can view the events in the Events journal window that can be accessed from the Other info tab of the Fixed assets management function.
Specific Buttons
Error messages
In addition to the generic error messages, the following messages can appear during the entry :
"Impairment loss reversal impossible, the selected assets are not impaired."
An impairment loss reversal is established when the recoverable value is greater than the net value, but this reversal cannot be recorded if no impairment loss of the plan has taken place in the previous periods.
A revaluation should be conducted to take this value increase into account.
"A company calculation must be carried out in order to impair"
A depreciation or depreciation reversal is recorded after having calculated the depreciations for the period or fiscal year. As a result, the impairment loss processing is only authorized after a periodic calculation (or fiscal year) for the company.
"Impossible to impair this asset because it has already been subject to a revaluation in the current period."
During the same period, it is not possible to perform both a revaluation and a depreciation on the same plan. If the asset has been revaluated, it is necessary to have previously canceled this revaluation in order to proceed with the impairment loss.