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Implementing SFAS No 121: Accounting for Impaired Assets
R W Luecke1, D T Meeting, W G Stotzer
1International Approval Services, Inc., Cleveland, OH, USA.
Summary
Financial Accounting Standards Board (FASB) Statement No. 121 addresses asset impairment and disposal. Healthcare financial managers must understand its implications for accurately valuing long-lived assets.
Area of Science:
- Financial Accounting
- Asset Management
- Healthcare Finance
Background:
- Statement of Financial Accounting Standards (SFAS) No. 121 was issued in March 1995.
- This standard addresses accounting for the impairment of long-lived assets.
- It also covers accounting for long-lived assets designated for disposal.
Purpose of the Study:
- To inform healthcare financial managers about SFAS No. 121.
- To explain the implications of asset impairment accounting standards.
- To ensure accurate financial reporting for long-lived assets.
Main Methods:
- Analysis of SFAS No. 121.
- Review of accounting standards for asset impairment.
- Examination of asset disposal accounting principles.
Main Results:
- SFAS No. 121 establishes criteria for recognizing and measuring asset impairment.
- The statement provides guidance on assets held for disposal.
- It requires adjustments when carrying costs exceed an asset's recoverable amount.
Conclusions:
- Healthcare organizations must understand SFAS No. 121 for compliance.
- Accurate application of impairment rules is crucial for financial statement integrity.
- Understanding asset disposal accounting prevents overstatement of asset values.