The recoverability test is a gate. In the Beacon production-cell facts:
$60,000 carrying amount > $52,000 undiscounted cash flows
The negative $8,000 margin means the screen fails. It does not measure an $8,000 loss. Fair value of $44,000 enters only at the measurement stage and produces a $16,000 loss.
ASC 360-10-35-17 states both comparisons. Carrying amount above the applicable undiscounted cash flows means the asset group is not recoverable. Carrying amount above fair value then measures the impairment loss.
A passing control
If the same $60,000 carrying amount were supported by $62,000 of applicable undiscounted cash flows, the screen would pass. Within this bounded model, no Topic 360 impairment loss would be recorded even if supplied fair value were $44,000. That contrast prevents students from using fair value too early.
Evidence before arithmetic
Undiscounted does not mean unexamined. Forecast horizon, asset-group boundary, cash-flow inclusions, consistency with internal plans, probability assumptions, and double counting all require support. Finance learners may use discounted cash-flow valuation for a different analytical question. They must identify that different question instead of substituting the model into the US GAAP screen.
This concept is scoped only to the held-and-used Topic 360 teaching pattern. It is not a universal impairment test across accounting frameworks or asset types.
Put the concept to work
Understand this concept
- Explain why the held-and-used recoverability comparison is an undiscounted screening step rather than the amount of impairment loss or a general valuation.
Analyze this concept
- Analyze whether a bounded asset group passes the recoverability screen and distinguish that result from the separate fair-value loss measurement.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Accounting estimate — Analyze
To analyze this concept: Required. Cash-flow inputs require sensitivity and evidence analysis even when the comparison itself is simple.
- Accounting estimate — Understand
To understand this concept: Required. Future cash-flow inputs are evidence-dependent estimates rather than observed cash already received.
- Carrying amount — Analyze
To understand this concept: Required. The screen requires the correctly scoped carrying amount for the asset group at the testing date.
Show 2 more prerequisites
- Long-lived asset impairment — Understand
To analyze this concept: Required. The larger impairment sequence explains what a failed screen unlocks and what a passed screen stops.
- Recoverability test — Understand
To analyze this concept: Required. The learner must know the screen's limited decision role before interpreting its numerical margin.
Lessons
Worked examples and cases
Practice
Common mistaken ideas
Sources
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Related concepts
Use this idea next
- Long-lived asset impairment — Apply
Required level here: analyze. Required. The recoverability decision determines whether fair value becomes the loss-measurement input.
- Recoverability test — Analyze
Required level here: understand. Required. The learner must know the screen's limited decision role before interpreting its numerical margin.