A finished ACC-370 Topic 7 impairment trigger analysis example, taking two asset groups through indicator, recoverability and measurement in order, and showing why only one records a loss. Searches like "acc 370 topic 7 assignment example", "acc370 topic 7 sample" and "acc-370 topic 7 example" land here.
What a finished ACC-370 Topic 7 impairment trigger analysis looks like
Two asset groups sit side by side, each a production line with its own identifiable cash flows, every figure illustrative. The first part asks whether anything calls the carrying amounts into question and names the indicator: losing the company's largest customer, a significant adverse change in the business climate for both lines. Line A carries $800,000; its undiscounted future cash flows total $720,000, so the carrying amount is not recoverable, and a fair value of $560,000 gives a $240,000 impairment loss. Line B also carries $800,000 and has a fair value of only $700,000, but its undiscounted cash flows of $850,000 exceed the carrying amount, so no loss is recognized. The analysis records the entry for Line A, resets its depreciation from the new basis and notes that US GAAP will not let the loss be reversed.
How an ACC-370 Topic 7 example is structured
The analysis follows the sequence ASC 360 sets for long-lived assets held and used, and it refuses to skip ahead. It opens by defining each asset group at the lowest level with identifiable cash flows, since the test cannot run on an asset that produces no cash flows independently. The indicator comes second, with the reason it bears on both lines. The recoverability test comes third, comparing each carrying amount with the sum of undiscounted future cash flows, with the cash flow assumptions listed. A fourth part measures the loss for the line that fails, using fair value, and explains why the line that passes records nothing despite its lower fair value. The fifth part records the entry and the revised depreciation. The analysis ends on Line B, naming the further decline in expected volumes that would push it into impairment.
Asset groups defined before testing
Each production line is treated as the lowest level with identifiable cash flows, which is where the recoverability test has to be run under the guidance.
The indicator named and connected
Losing the largest customer is identified as an adverse change in the business climate, and the analysis explains why it touches both lines rather than one.
Undiscounted cash flows as the gate
Carrying amount is compared with the undiscounted sum of expected future cash flows, and only a line failing that comparison goes on to measurement.
Fair value measures the loss
For Line A the loss is carrying amount less fair value, $240,000, not carrying amount less the undiscounted total, a substitution the example warns against.
A lower fair value with no loss
Line B's fair value sits below its carrying amount, yet it passes recoverability, so US GAAP records nothing and the example explains that outcome.
Where marks go in ACC-370 Topic 7
Sequence is where impairment answers usually break, and markers read for it first. Starting from a fair value calculation, with no indicator identified, performs a test the facts may not require and skips the judgment on which the whole analysis depends. Using discounted cash flows in the recoverability step, or undiscounted cash flows to measure the loss, swaps the two measures and produces a wrong loss. Papers that impair Line B because its fair value is lower have applied a one-step test US GAAP does not use for assets held and used. Testing a single machine that generates no cash flows of its own, instead of the group it belongs to, makes the recoverability comparison meaningless. An impairment recorded without revised depreciation afterward, or later reversed, shows the consequences of the loss were not followed through.
Get an ACC-370 Topic 7 example written to your instructions
Send the ACC-370 Topic 7 instructions, your rubric and the asset facts or cash flow data your section supplied. We write a custom example to them, with the asset group defined, the indicator identified, recoverability tested on undiscounted cash flows, any loss measured at fair value and the depreciation reset, back in 24 to 48 hours. The first one is free.
ACC-370 Topic 7 questions, answered
Why does the recoverability test use undiscounted cash flows?
Because the question at that stage is only whether the company expects to recover the carrying amount through use and eventual disposal, not what the asset is worth today. Undiscounted cash flows set a deliberately low bar, so impairment is recognized only when even the unadjusted total falls short. Once that bar is failed, the loss itself is measured at fair value.
Can an asset with a fair value below carrying amount escape impairment?
Yes, under US GAAP, for long-lived assets held and used. If undiscounted future cash flows exceed the carrying amount, the asset passes recoverability and no loss is recognized, whatever its fair value. International standards compare carrying amount with a recoverable amount in a single step, so the same facts can produce a loss under IFRS and none under US GAAP.
Are intangible assets tested the same way?
Finite-lived intangibles follow the same held-and-used approach as equipment. Indefinite-lived intangibles and goodwill are different: they are not amortized and are tested at least annually, with an option in some cases to weigh qualitative factors before any quantitative test. The guidance for goodwill sits in ASC 350, and coursework usually reaches it separately from property and equipment.