Impairment of long-lived assets under ASC 360

US GAAP impairment of property, plant and equipment and finite-lived intangibles works very differently from IFRS, mainly because of the undiscounted cash flow screen. This guide explains triggering events, asset groups, both steps of the ASC 360 impairment test and the rules for assets held for sale, with an example.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. 3 minute read.

Short answer

ASC 360 impairment testing applies to long-lived assets such as property, plant and equipment and finite-lived intangibles. An asset or asset group held and used is tested for impairment when events indicate its carrying amount may not be recoverable. The test has two steps: first, compare the carrying amount with the undiscounted future cash flows expected from use and disposal; only if those cash flows are lower is the asset group impaired, and the loss is then measured as the excess of carrying amount over fair value. Impairment losses on assets held and used are never reversed. Assets held for sale are measured at the lower of carrying amount and fair value less costs to sell.

At a glance

Test when
Triggering events occur
Level
Asset group: lowest level of independent cash flows
Step 1
Undiscounted cash flows vs carrying amount
Step 2
Loss = carrying amount less fair value
Reversal
Never, for assets held and used
Excel
Impairment test model
Impairment of long-lived assets under ASC 360Test when: Triggering events occur; Level: Asset group: lowest level of independent cash flows; Step 1: Undiscounted cash flows vs carrying amount; Step 2: Loss = carrying amount less fair value; Reversal: Never, for assets held and used; Excel: Impairment test model.KEY FACTS AT A GLANCEImpairment of long-lived assets under ASC 360Test whenTriggering events occurLevelAsset group: lowest levelof independent cash flowsStep 1Undiscounted cash flowsvs carrying amountStep 2Loss = carrying amountless fair valueReversalNever, for assets heldand usedExcelImpairment test modelTax BakersImpairment of long-lived assets under ASC 360Test when: Triggering events occur; Level: Asset group: lowest level of independent cash flows; Step 1: Undiscounted cash flows vs carrying amount; Step 2: Loss = carrying amount less fair value; Reversal: Never, for assets held and used; Excel: Impairment test model.KEY FACTS AT A GLANCEImpairment of long-lived assetsunder ASC 360Test whenTriggering events occurLevelAsset group: lowest level of independentcash flowsStep 1Undiscounted cash flows vs carrying amountStep 2Loss = carrying amount less fair valueReversalNever, for assets held and usedExcelImpairment test modelTax Bakers
Key facts at a glance, as set out in this guide.

How does the ASC 360 impairment test work?

Is the asset group impaired under ASC 360?Is the asset group impaired under ASC 360?Has a triggering eventoccurred?NoNo test neededYesAre undiscounted cash flows lessthan the carrying amount?NoRecoverable:no impairmentYesImpairment = carrying amount less fair value
The undiscounted screen comes first; fair value measures the loss.

What are triggering events?

  • A significant decrease in the market price of the asset.
  • A significant adverse change in how the asset is used, or in its physical condition.
  • Adverse legal factors or business climate, including action by a regulator.
  • Costs significantly above the amount originally expected to acquire or build the asset.
  • Current-period losses combined with a history of losses or a forecast of continuing losses.
  • An expectation, more likely than not, that the asset will be sold or disposed of significantly before the end of its useful life.

What is an asset group?

Long-lived assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. A retail chain may test each store; a manufacturer with integrated plants may test the whole production network. Goodwill is included in an asset group only if the group is a reporting unit or includes one.

A worked example

An asset group has a carrying amount of $1,000 million. Falling demand triggers a test.

ScenarioUndiscounted cash flowsFair valueResult
A$1,050 million$800 millionRecoverable: no impairment, even though fair value is far below carrying amount
B$950 million$800 millionNot recoverable: impairment of $200 million, carrying amount less fair value

The recoverability test decides whether there is an impairment; fair value decides how big it is. In scenario B the loss is $200 million, not the $50 million shortfall in undiscounted cash flows. The US GAAP tests sheet of the Impairment test model (Excel) runs both scenarios.

How is the loss allocated?

Across the long-lived assets of the group pro rata to their carrying amounts, but no individual asset is reduced below its own fair value if that can be determined without undue cost and effort. The reduced carrying amount becomes the new cost basis, depreciated over the remaining useful life.

What about assets held for sale?

When the held-for-sale criteria are met, including a committed plan, availability for immediate sale and an expected sale within a year, the asset or disposal group is measured at the lower of its carrying amount and fair value less costs to sell, and depreciation stops. Later increases in fair value less costs to sell are recognized, but not above the cumulative losses previously recognized.

How does IFRS differ?

IAS 36 has no undiscounted screen, measures the loss against recoverable amount, the higher of value in use and fair value less costs of disposal, and requires reversals when estimates change. See IAS 36 vs US GAAP impairment and, for goodwill, the ASC 350 goodwill test.

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Questions people ask

How does the ASC 360 impairment test work?

First compare an asset group's carrying amount with its undiscounted future cash flows; if they are lower, recognize an impairment equal to the excess of carrying amount over fair value.

What is an asset group under ASC 360?

The lowest level of long-lived assets for which identifiable cash flows are largely independent of other assets and liabilities.

Can ASC 360 impairment losses be reversed?

Not for assets held and used. For assets held for sale, later increases in fair value less costs to sell are recognized up to previous losses.

Why is US GAAP impairment recognized later than IFRS?

Because the recoverability test uses undiscounted cash flows, which are higher than discounted values.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. FASB Accounting Standards Codification: Topic 350, Intangibles: Goodwill and Other
  2. FASB Accounting Standards Codification: Topic 360, Property, Plant, and Equipment

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

IFRS vs US GAAPIAS 36 vs ASC 350 and 360: impairment differencesASC 350The goodwill impairment test under ASC 350ASC 350Goodwill and intangible assets under ASC 350

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This guide is general information. It is not tax or legal advice for your situation.