Long-lived asset impairment: recoverability first, measurement second
Apply the two-gate ASC 360 test to a held-and-used asset group using undiscounted cash flows and fair value evidence.
The decision that earns the point
Classify the item before measuring it
For a held-and-used long-lived asset group with an impairment indicator, first test recoverability by comparing carrying amount with the sum of undiscounted cash flows expected from use and eventual disposition. If carrying amount is not recoverable, measure the impairment loss as carrying amount minus fair value.
Exam use
FAR can test the asset-group level, impairment indicators, undiscounted recoverability, fair-value measurement, the revised carrying amount, and later depreciation.
Your scratch-paper plan
Solve it in three moves
- 1
Identify the asset group and trigger
Test at the lowest level with identifiable cash flows largely independent of other assets after an event or change indicates possible impairment.
FASB ASC 360-10: Property, Plant, and Equipment - Overall - 2
Run the undiscounted recoverability gate
Compare carrying amount with undiscounted cash flows from use and eventual disposition before measuring any loss.
FASB ASC 360-10: Property, Plant, and Equipment - Overall - 3
Measure with fair value only after failure
If the group is not recoverable, recognize carrying amount minus fair value and use the reduced amount for future depreciation.
FASB ASC 360-10: Property, Plant, and Equipment - Overall
Worked problem
Work the facts before choosing the answer
A held-and-used asset group has a $900,000 carrying amount, an impairment indicator, $850,000 total undiscounted cash flows from use and disposition, and $700,000 fair value. Goodwill and held-for-sale classification are absent.
CPAPass exam analysis using the stated assumptions
Show the work
The group fails recoverability because $900,000 carrying amount exceeds $850,000 undiscounted cash flows. The loss is then measured at $200,000: $900,000 carrying amount less $700,000 fair value.
Rule source: FASB ASC 360-10: Property, Plant, and Equipment - OverallAnswer
Recognize a $200,000 impairment loss and reduce the asset group to $700,000. Use the new carrying amount for future depreciation over the remaining useful life.
Rule source: FASB ASC 360-10: Property, Plant, and Equipment - OverallDo it now
Test the same decision with a fresh question
Start with free FAR practice. Create an account only when you want the 5-day no-card CPAPass trial and continued section practice.
The trap and the repair
Common trap
Comparing carrying amount directly with fair value at the first gate skips the required undiscounted-cash-flow recoverability test for held-and-used long-lived assets.
Repair
Write recoverability and measurement as two boxes and do not enter the fair-value box unless the undiscounted gate fails.
Authority and scope boundary
FASB ASC 360-10 controls held-and-used long-lived asset-group impairment. Goodwill uses ASC 350, and assets classified as held for sale use a different ASC 360 measurement and depreciation model protected by their existing owners.
2026 Uniform CPA Examination Blueprints and FASB ASC 360-10: Property, Plant, and Equipment - Overall were reviewed on 2026-08-14. Check a newer authority when the effective date or facts change.
Two-gate impairment flow
Do not use fair value until recoverability fails
The held-and-used model deliberately uses different amounts for the recognition gate and the loss measurement.
| Impairment stage | Comparison | Output | Authority |
|---|---|---|---|
| Asset-group scope | Lowest level with largely independent identifiable cash flows | Define the unit to test | FASB ASC 360-10: Property, Plant, and Equipment - Overall |
| Recoverability | $900,000 carrying versus $850,000 undiscounted cash flows | Not recoverable; proceed to measurement | FASB ASC 360-10: Property, Plant, and Equipment - Overall |
| Loss measurement | $900,000 carrying less $700,000 fair value | $200,000 impairment loss | FASB ASC 360-10: Property, Plant, and Equipment - Overall |
| Subsequent accounting | $700,000 new carrying amount | New cost basis for future depreciation; no restoration under this model | FASB ASC 360-10: Property, Plant, and Equipment - Overall |
After a miss
Repair a long-lived impairment miss
- 1
Label carrying amount, undiscounted cash flows, and fair value before comparing any two amounts.
- 2
Rework the example with $950,000 undiscounted cash flows and explain why no loss is recognized despite the $700,000 fair value.
- 3
Answer a fresh FAR impairment question and record scope, trigger, recoverability, measurement, and future depreciation in order.
Your exam workflow
- Step 1Identify the requirementTest at the lowest level with identifiable cash flows largely independent of other assets after an event or change indicates possible impairment.FASB ASC 360-10: Property, Plant, and Equipment - Overall
- Step 2Classify the factsCompare carrying amount with undiscounted cash flows from use and eventual disposition before measuring any loss.FASB ASC 360-10: Property, Plant, and Equipment - Overall
- Step 3Apply the authorityIf the group is not recoverable, recognize carrying amount minus fair value and use the reduced amount for future depreciation.FASB ASC 360-10: Property, Plant, and Equipment - Overall
- Step 4Check the outputRecognize a $200,000 impairment loss and reduce the asset group to $700,000. Use the new carrying amount for future depreciation over the remaining useful life.FASB ASC 360-10: Property, Plant, and Equipment - Overall
Keep the next step narrow
Quick questions
What is the key rule?
For a held-and-used long-lived asset group with an impairment indicator, first test recoverability by comparing carrying amount with the sum of undiscounted cash flows expected from use and eventual disposition. If carrying amount is not recoverable, measure the impairment loss as carrying amount minus fair value.
How can this topic be tested on the CPA Exam?
FAR can test the asset-group level, impairment indicators, undiscounted recoverability, fair-value measurement, the revised carrying amount, and later depreciation.
What mistake most often changes the result?
Comparing carrying amount directly with fair value at the first gate skips the required undiscounted-cash-flow recoverability test for held-and-used long-lived assets. Write recoverability and measurement as two boxes and do not enter the fair-value box unless the undiscounted gate fails.
Where should I practice the decision?
After the worked example, open the FAR free-practice link and work a fresh question that tests the same decision. If the miss depends on Held-for-sale accounting, review that handoff before trying another set.