What is the test to reduce?

Asset disturbance test concerns the decline in the company's market price. When the market price of the asset - or real value - decreases significantly, the company must record the difference as the amount of value reduction. Accounting does not test a test to reduce the value of each accounting period or for each asset. Testing each asset is not always necessary. Test requirements are usually dictated according to national accounting standards. These include a significant reduction in the market price of assets, a fundamental change in the use of the company's assets or changes in legal factors, as the company uses assets. There are also several other less common rules for damage to assets. High accumulation of costs, loss of cash flows in the current period or for several past periods, and expecting that the company will sell the asset before the end of its life. First, the accountant must compile a historical value for all assets recorded on the company's main book. Real value for all ACTiva owned by companies comes from the current markets where the company can sell asset. Comparison of these two numbers helps accounting to identify impaired assets. Asset with a real value higher than the recorded accounting value - with a difference that is awkward - generally represents damage to assets.

The second part of the asset disruption test requires that the accounting compares cash flows to the current cost of asset. The accountants calculate the total unrecognized cash flows from future years; No cash flow discounting is required for this calculation. The total number of cash flows of each asset represents the future benefits of every asset. Accountants are looking for any asset, who are borne by cash flows exceeding the recorded account. The difference between the two numbers is the amount that the company records as an asset damage.

Company usually have to write off the amounts of asset deterioration asloss against net income. Accounting systems have different rules for detachment of failures. In some cases, the company may be able to distribute loss of deterioration against several accounting periods. This prevents the company from a single accounting period with a significant reduction in net income. The companies must publish any asset disorders to the parties to inform them of these main business changes.