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impairment is the decrease of fair value of an intangible asset where amortisation is periodic (usualy yearly) distribution of cost of an asset over its life. suppose a factory equipment worth 25000 and estimated life is 5 years, we will charge 25000/5=5000 /year on a straightline basis as amortisation. Now suppose with this equpment we can build something which required licencing...suppose the machine is used for making coca cola. To obtain the licence, the cost is 100,000. so the licence is an intangible asset. IAS reqires intangible ASSETS to be revalue atleast a year to see whether the fair value has increased/decreased. If the fair value is decreased from the cost/ carrying amount... we say the asset has impaired. And we record the value by which the asset has been impared. Note, Useful life has nothing to do with impairment. Fair value can be market value at the date of the impairment test.

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Q: What is the difference between amortization and impairment?
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What is the difference between impairment and write off?

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What is impairment cost?

When assets are recorded a company's balance sheet, they are valued at historical cost (what was paid for the asset), less any accumulated depreciation or amortization if applicable. This holds true even if the market value of the asset is considerably more than what the company paid for it. However, if the market value of a company's assets drops significantly below the asset's historical cost, then it sometimes becomes necessary to revalue the asset at the lower market value. This revaluation is called impairment. When it is appropriate to impair an asset depends on the type of asset in question. The difference between the current book value of the asset, and the value of the asset after impairment, is your impairment expense (cost).


Is the straight-line amortization or effective interest rate method better?

This method is preferred over the straight-line method of amortizing bond discount or bond premium. Amortization of a bond discount or premium is the difference between the interest expense and the nominal interest payment. The amortization entry is: Interest Expense (effective interest rate x carrying value) Cash (nominal interest rate x face value) Bond Discount (for the difference)


Whai is difference between sinking fund and amortization of assets?

Sinking fund is the setting aside of money for instance by the government to a pool to reduce its budget deficit while amortization is the paying off of debts over a period of time with a decreasing principal balances and interests Read more in related link.


What is the difference between amortization and depreciation?

Amortization usually refers to spreading an intangible asset's cost over that asset's useful life. Depreciation, on the other hand, refers to prorating a tangible asset's cost over that asset's life.Depreciation Is Applicable only on Fixed & Tangible Assets Which Depends on useful life of that assets that may be expected accurately but Amortization applicable on Intangible Assets whose life is very critical to be measured.DEPRECIATION is calculated for tangible assets while AMORTIZATION is calculated for intangible assets.