CHAPTER 9 (PART II) – REPORTING AND INTERPRETING PROPERTY,
PLANT, AND EQUIPMENT; NATURAL RESOURCES; AND INTANGIBLES
Impairment: Occurs when events or change circumstances cause the book value of long-
term assets to exceed their fair value, such as a significant decrease in its market price.
If net book value > fair value, then the asset is impaired.
Fair value: The amount at which an asset can be bought or sold between two willing
parties. Can be determined based on quoted market prices.
Impairment loss = Net book value – Fair value
The disposal of an amortizable asset usually requires two entries:
1. An adjusting entry to update the amortization expense and accumulated
2. An entry to record the disposal.
Net book value = Original cost – Accumulated amortization
Natural resources often called wasting assets, because they are depleted.
Depletion: The systematic and rational allocation of the cost of a natural resource over
the period of exploitati