Asset Impairments

Impairment Processing Steps

To process an impairment for an asset item, complete the following steps in the accounting period in which the impairment occurs:

Enter a journal entry for the impairment to reduce the asset's value on your Balance Sheet and recognize a loss on your Income Statement.
Record the impairment for the asset item in the Equipment hub. You can add an impairment to the Acquisition Cost grid on the GL Cost tab, reduce the useful life in years on the GL Book tab, or do both. This changes the depreciation calculation going forward for the asset item.
Process depreciation for the asset item after you change the depreciation calculation.

Journal Entry

Enter the following journal entry in Transaction Center > Transaction Entry:

Account	Debit	Credit
Impairment Expense	X
Accumulated Asset Impairment Loss		X

Changes to an Impaired Asset Item

The following are the ways you can record an impairment in the Equipment hub for an asset item and how this changes the depreciation calculation for an impaired asset item:

Way to Record the Impairment in the Equipment hub	Description
Enter an acquisition cost for the asset item.	In the Acquisition Costs grid on the GL Cost tab, enter a row for the impairment with a negative amount. The depreciation basis for the asset item is reduced by the impairment amount. Going forward, the monthly depreciation that is calculated for the asset item is reduced. You must clear the Life of Assets check box in the row so that the deprecation calculation change will apply only for the periods going forward. If you do not clear it, the impairment amount will be used to recalculate depreciation for prior periods when you run deprecation in the current month because it expects the impairment amount to apply for the life of the asset. `Deltek` will use the straight-line depreciation method to calculate depreciation for the asset item for the remainder of its useful life in years, regardless of what depreciation method is assigned to the asset item on the GL Book tab and the Additional Books tab in the Equipment hub.
Change the useful life in years for the asset item.	Change the useful life in years for the asset item in the Useful Life In Years field on the GL Book tab on the Equipment form. You must also clear the Life of Asset check box for at least one cost row (any row) in the Acquisition Cost grid on the GL Cost tab. Going forward, starting in the month in which you entered the impairment, the monthly depreciation calculation will change and be based on the new useful life in years. In addition, `Deltek` will make a one-time depreciation adjustment when you run depreciation in the period in which you entered the impairment. This adjustment is made so that total depreciation expense and total accumulated depreciation in this period now reflect the new depreciation calculation for all prior periods. `Deltek` applies the new calculation for the depreciation for previous months and makes the depreciation adjustment for this in the period in which you made the impairment. It does not post this adjustment in the previous months. `Deltek` will use the straight-line depreciation method to calculate depreciation for the asset item for the remainder of its useful life in years, regardless of what depreciation method is assigned to the asset item on the GL Book tab and the Additional Books tab in the Equipment hub. Do not rerun depreciation processing in a prior period for an impaired asset item unless you change the useful life in years back to the original value before the impairment. Then, change the useful life in years back to the impairment value. Example: You have an asset item that has a useful life of 4 years. The depreciation basis is $10,000, which is $2,500 of depreciation per year or $208.33 per month. After one year of depreciation, the accumulated depreciation for the asset item is $2,500, and the remaining depreciation to apply is $7,500. At the start of period 13, you change the useful life from 4 years to 3 years. Now the depreciation for each of the 3 years should be $3,333.33 or $277.78 per month. When you run depreciation in period 13 after you change the useful life in years to 3, `Deltek` calculates $1,111.14 of depreciation for period 13. This consists of the following: $277.78: This is the depreciation for period 13, using the new depreciation calculation. $833.36: This is the adjustment for the first 12 periods, so that period 13's total depreciation and accumulated depreciation correctly includes the depreciation from those prior periods using the new depreciation calculation. Based on the new depreciation calculation, the accumulated depreciation in period 12 should be $3,333.36 (12 x $277.78). However, the accumulated depreciation in period 12 was $2,500. The difference between $3,333.36 and $2,500 is $833.36. The depreciation calculated for the remaining period after period 13 is $277.78.

Way to Record the Impairment in the Equipment hub

Description

Enter an acquisition cost for the asset item.

In the Acquisition Costs grid on the GL Cost tab, enter a row for the impairment with a negative amount.

The depreciation basis for the asset item is reduced by the impairment amount. Going forward, the monthly depreciation that is calculated for the asset item is reduced.
You must clear the Life of Assets check box in the row so that the deprecation calculation change will apply only for the periods going forward. If you do not clear it, the impairment amount will be used to recalculate depreciation for prior periods when you run deprecation in the current month because it expects the impairment amount to apply for the life of the asset.
Deltek will use the straight-line depreciation method to calculate depreciation for the asset item for the remainder of its useful life in years, regardless of what depreciation method is assigned to the asset item on the GL Book tab and the Additional Books tab in the Equipment hub.

Change the useful life in years for the asset item.

Change the useful life in years for the asset item in the Useful Life In Years field on the GL Book tab on the Equipment form. You must also clear the Life of Asset check box for at least one cost row (any row) in the Acquisition Cost grid on the GL Cost tab.

Going forward, starting in the month in which you entered the impairment, the monthly depreciation calculation will change and be based on the new useful life in years. In addition, Deltek will make a one-time depreciation adjustment when you run depreciation in the period in which you entered the impairment. This adjustment is made so that total depreciation expense and total accumulated depreciation in this period now reflect the new depreciation calculation for all prior periods. Deltek applies the new calculation for the depreciation for previous months and makes the depreciation adjustment for this in the period in which you made the impairment. It does not post this adjustment in the previous months.

Deltek will use the straight-line depreciation method to calculate depreciation for the asset item for the remainder of its useful life in years, regardless of what depreciation method is assigned to the asset item on the GL Book tab and the Additional Books tab in the Equipment hub.

Do not rerun depreciation processing in a prior period for an impaired asset item unless you change the useful life in years back to the original value before the impairment. Then, change the useful life in years back to the impairment value.

Example:

You have an asset item that has a useful life of 4 years. The depreciation basis is $10,000, which is $2,500 of depreciation per year or $208.33 per month. After one year of depreciation, the accumulated depreciation for the asset item is $2,500, and the remaining depreciation to apply is $7,500.

At the start of period 13, you change the useful life from 4 years to 3 years. Now the depreciation for each of the 3 years should be $3,333.33 or $277.78 per month. When you run depreciation in period 13 after you change the useful life in years to 3, Deltek calculates $1,111.14 of depreciation for period 13. This consists of the following:

$277.78: This is the depreciation for period 13, using the new depreciation calculation.
$833.36: This is the adjustment for the first 12 periods, so that period 13's total depreciation and accumulated depreciation correctly includes the depreciation from those prior periods using the new depreciation calculation. Based on the new depreciation calculation, the accumulated depreciation in period 12 should be $3,333.36 (12 x $277.78). However, the accumulated depreciation in period 12 was $2,500. The difference between $3,333.36 and $2,500 is $833.36.

The depreciation calculated for the remaining period after period 13 is $277.78.

Multiple Impairments

You can enter more than one impairment for an asset item in the Acquisition Cost grid on the GL Cost tab in the Equipment hub. Deltek looks at the Period field in the Acquisition Cost grid for the impairments (the Life of Asset check box is cleared) to calculate the remaining depreciation amounts.

Rerunning Depreciation for Impaired Asset Items

For impaired asset items, if you go back to a prior period and rerun depreciation (or go back to a prior period and unpost and rerun depreciation), you must run depreciation in each period going forward until you reach the current period.

Impairment Example

For an impairment example, see KB article 83456 on the Deltek Customer Care Connect site.

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