Held and Used vs Held for Sale Impairment: Why Are the Tests Different?
The accounting changes when management shifts from using an asset to selling it, so the impairment model changes too.
Held and used
For long-lived assets held and used, impairment analysis generally begins with a recoverability test using undiscounted cash flows before measuring any impairment loss under the applicable guidance.
Held for sale
Assets classified as held for sale are generally measured using a sale-oriented model based on carrying amount versus fair value less cost to sell.
Depreciation
A held-for-sale classification can change whether depreciation continues because the asset is no longer expected to be recovered primarily through use.
Exam strategy
Classify the asset first. If the question says management has committed to a qualifying sale plan, do not automatically use the held-and-used impairment sequence.
The takeaway
Held-and-used assets follow a use-based impairment model; held-for-sale assets move to a sale-based measurement model.
Related Summit resources
FAQ
Do held and used and held for sale use the same impairment model?
No.
What should you classify first?
Whether the asset is still held for use or qualifies as held for sale.
Why does held-for-sale classification matter?
Recovery is expected primarily through sale rather than continued use.