According to ASC 360-10-20, “an impairment is the condition that exists when the carrying amount of a long-lived asset (asset group) exceeds its fair value”. In order to determine if the impairment exist in the case, we will have to compare the carrying amount with the fair value of the assets. In regards to the municipal bounds, its amortized cost, $8,500,000 exceeds its fair value, $7,500,000. And corporate bonds’ amortized cost, $8,300,000 also exceeds its fair value, $6,800,000. Therefore, the impairments have occurred.
In addition, according to ASC 320-10-35-33B, if an entity does not intend to sell the debt security, and the entity is more likely than not will be required to sell the security before the recovery of its amortized cost basis, an other-than-temporary impairment shall be considered to have occurred. Further, ASC 320-10-35-33C states if an entity does not expect to recover the entire amortized cost basis of the security, other-than-temporary impairment shall be considered to have occurred.
In Scenario A, Company A has determined that they do not intend to sell the debt securities at March 31, 2006 and it is not more-likely-than-not that they will be required to sell the debt securities before the recovery of its amortized cost basis. According to Company A’s determinations and the codifications listed above, Company A should qualify the impairment as a temporary impairment on the balance sheet as of March 31, 20X6 and fully recover its amortized cost basis.
The Essay on Organizational Security and Expansion Assessment
As director of security for this company I will ensure a threat and vulnerability assessment to protect the company and remain profitable in business. In preparing to expand my security company in the Middle East and Africa there are several things that I must consider. Some of them are threats, threats of other security companies trying to buy me out, internet hacking, surveillance system, ...
Scenario B: First, we have to determine whether impairment occurs in scenarios B. As stated in Scenarios A, in order to determine if the impairment exist in the case, we will have to compare the carrying amount with the fair value of the assets. In this case, the fair value of the stock is less than its cost, $85 per share; therefore, the impairment does not exist.
One of the impairment indicators listed in ASC 320-10-35-27 is the factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants. As indicated in the case, Company B has a high credit rating, and is forecasted to recover by April 20X7; therefore, the impairment should be classified as a temporary impairment on the balance sheet as of March 31, 20X6.
