Impairment
Related terms
Category
General Concepts
Impairment occurs when the carrying amount of a right-of-use asset exceeds its recoverable amount. Under ASC 842, ROU assets are tested for impairment under ASC 360 (long-lived assets) using a two-step process: recoverability test followed by fair value measurement.
Why it matters
ROU asset impairment was a significant issue during economic downturns when companies abandoned or significantly reduced use of leased spaces. The impairment test considers whether the asset's undiscounted future cash flows exceed its carrying amount. If not, the asset is written down to fair value, creating an impairment loss.
How Arvexi handles this
Arvexi supports ROU asset impairment testing with scenario modeling. When impairment is identified, the platform records the write-down, adjusts the carrying amount, and recalculates the remaining amortization schedule based on the reduced asset value.