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Summarize Learnings
Summarize Learnings
• Impairment – included under expenses when the book value of an asset exceeds the
recoverable amount. Impairment of asset is diminishing in quality, strength, amount or
value of an asset. It is simply: Carrying Amount > Recoverable Amount.
• Formula: Carrying Amount – Recoverable Amount
Where: Carrying Amount = amortized cost of receivable + accrued interest
Recoverable Amount = PV of future cash flow using original EIR
• Impairment can be done through direct and allowance method.
• Factoring – sales
1) With Recourse Basis – without guaranty
2) Without Recourse Basis – with guaranty
Net Proceeds = FV of the Loan – Other Charges – Factors Holdback
Gain or Loss = Selling Price + Factors Holdback – Carrying Amount of AR