COVID-19 asset impairment considerations for long-lived assets

Many entities and practitioners face asset impairment testing and accounting challenges as a result of the COVID-19 pandemic. A recent Wall Street Journal article1 indicates that impairment charges for the first 6 months of 2020 are up 187% from the same period in 2019. The total figure for write-downs in the first half of the year is among the highest for the past 20 years, but lower than such charges in all of 2008 and 2015.

Impairment models under U.S. generally accepted accounting principles (U.S. GAAP) vary depending on the asset subject to the impairment test. Impairment models consideration of future events also vary significantly under current U.S. GAAP.

This report addresses the impairment of long-lived assets to be held and used by an entity. An illustrative example is presented in the appendix. The primary source of U.S. GAAP related to the impairment of long-lived assets is FASB ASC 360, Property, Plant, and Equipment, which includes subsections on asset impairment. The impairment guidance in FASB ASC 360 applies to long-lived assets of entities, including not-for-profit entities, to be held and used or to be disposed of, which includes