Screen and measure a held-and-used impairment

Beacon's production cell has lost customer demand. Your task is to decide whether that indicator leads to a loss and, if it does, how much Beacon records. Keep the undiscounted recoverability screen separate from the fair-value measurement that follows a failed screen.

Step zero: hold the scope constant

Beacon has an indicator, but the indicator is not the loss. Before comparing numbers, confirm that the production cell is held and used and that the asset-group boundary is supported. Also confirm that no goodwill is present and that every input refers to the same entity, unit, and date. The case stipulates those controls so the example can focus on sequence. ASC 360-10-35-21 supplies the indicator examples, while ASC 360-10-35-23 sets the asset-group boundary for this analysis.

Step one: screen recoverability

$52,000 undiscounted cash flows − $60,000 carrying amount
= −$8,000 recoverability margin

The $60,000 carrying amount is greater than the $52,000 undiscounted cash-flow total, so the screen fails. The negative $8,000 determines that measurement is required; it is not the impairment loss. ASC 360-10-35-17 keeps this screen and the following loss measurement in one required sequence.

Step two: measure the loss

$60,000 carrying amount − $44,000 supplied fair value
= $16,000 impairment loss

After recognition, carrying amount is $44,000. Under ASC 360-10-35-20, that adjusted amount becomes the new cost basis for later depreciation. Unlike the vehicle sale, this case does not say whether Beacon's ledger reduces an asset account directly or uses a separate linked impairment allowance. The abstract entry therefore names the carrying-amount reduction rather than inventing an account:

Debit   Impairment Loss               $16,000
Credit  Asset-group carrying amount
        (direct asset or linked allowance)       16,000

The disposal entry could name the gross asset and its existing contra balance because both accounts were stipulated. This impairment fact pattern stipulates only the asset group's net carrying amount. Beacon's governed account mapping must decide the exact credit account and later depreciation; the example establishes the loss and new carrying amount, not a universal ledger design.

Passing-case control

If undiscounted cash flows were $62,000, the $60,000 carrying amount would pass the screen. In this held-and-used model no impairment loss would be recognized, even with the same $44,000 fair value. Fair value is not used before the gate.

Interpret the charge carefully

The $16,000 loss reduces current income and the asset's carrying amount but does not itself pay or receive cash at recognition. Finance analysis should examine the demand decline, forecast changes, asset utilization, asset-group boundary, fair-value support, covenant definitions, and replacement or exit options. A noncash label does not make the underlying economic deterioration harmless.

Beacon's conclusion now has a complete path: a supported indicator and asset group, a failed $8,000 screen, a separately measured $16,000 loss, and a $44,000 new cost basis. Change the screen inputs or the asset-group boundary, and the conclusion may change.