Accounting for an intangible asset as a purchased patent (technology related) where its impaired and required to determine its fair value based on the present value by discounting its future cash flows to the date of impairment to determine any loss due to impairment, example is Corp-A during 20X4 spent $340,000 in R&D costs, Corp-A had previously purchased a Patent-A on 7/1/20X1 for $150,000 with 10 year life at that date, as a result of reduced demands for products protected by Patent-A, a possible impairment of Patent-A's value may have occurred on 12/31/20X4, Steps to determine whether there is an Impairment:1-Review events or changes in circumstances for possible Impairment, 2-Perform Recoverability Test: If the sum of expected future cash flows (undiscounted) is less than carrying amount of the asset, a. Fails test: (Future net cash flows less than carrying value), Recognize an Impairment Loss b. No Impairment: (Future net cash flows greater than carrying value), 3-If the recoverability test indicates that an Impairment has occurred then a loss is computed: Impairment Loss is the amount by which the carrying amount exceeds its fair value, fair value is measured based on the market value, if no active market exists then use the present value of expected future cash flows to determine fair value (Carrying Value - Fair Value) = Impairment Loss, Recognizing Impairments (Significant Changes): 1-Significant decrease in market value of an asset, 2-Significant change in extent or manner which asset is used, 3-Significant adverse change in legal factors or business climate that affects the value of the asset, 4-Accumulation of costs significantly in excess of the amount originally expected to acquire or construct an asset, 5-Projection or forecast that demonstrates continuing losses associated with an asset, detailed calculations and accounting by Allen Mursau
