loss of significant portion of utility of asset
-test is done at year end as a potential adjusting journal entry
step 1: is there impairment?
-compare book value of asset to estimated future cash flows
-if BV > FCF, the impairment, go to step 2 (def. of imp.)
-if BV < FCF, no impairment, do nothing
step 2: is there a loss on impairment?
-compare book value to FMV
-if BV > FMV, record loss equal to diff.
-if BV < FMV, record nothing (impaired but no loss)
Loss Due to Impairment