For Navigating the Impairment module - Check out the help center article here.
We know impairment testing can be complicated. Therefore, we have summarised the most frequently asked questions about:
- Cryptio’s impairment module
- Running and applying impairments in Cryptio
- Some dos and don’ts
1. What happens if I apply a new impairment test?
If you run and apply a new impairment test while another one is already applied, Cryptio compares the fair market value of each lot on the end date of the new impairment test period with the current cost basis. If the fair market value of a lot is lower than its current cost basis then another impairment is triggered and the fair market value of the lot becomes the new cost basis once applied.
2. How can I keep track of the different impairments for each lot?
You can track the history of all impairment tests in the Impairment module (see below).
The “Total Impairment to date” above indicates the total of all impairments applied through the corresponding end date.
What happens if a lot is partially sold during a period and impaired (example)?
1 lot of 10 units is purchased on 10 October.
3 units are sold on 17 November, and another on 22 December.
| Date | Type | Volume | Price / unit |
|---|---|---|---|
| 10 Oct 2022 | Incoming (Lot purchase) | 10 | 1000 |
| 17 Nov 2022 | Outgoing (Partial Sell) | 3 | 900 |
| 22 Dec 2022 | Outgoing (Partial Sell) | 3 | 700 |
2 impairment tests are successively run and applied.
| Impairment Test | Chosen period for the impairment test | Volume | Price / unit | Impaired price / unit | Comment |
|---|---|---|---|---|---|
| First test | Oct-Nov | 3 | 1000 | - | the 3 sold units are not impaired |
| First test | Oct-Nov | 7 | 1000 | 800 | 7 units are impaired |
| Second Test | Oct-Dec | 3 | 1000 | the first 3 sold units are not impaired | |
| Second Test | Oct-Dec | 3 | 1000 | 800 | within the 7 units that have been impaired in the first test, 3 are sold in the period. Therefore, the carrying value is the fair value price used in the first impairment test. |
| Second Test | Oct-Dec | 4 | 1000 | 700 | within the 7 units that have been impaired in the first test, 4 are still unsold. The carrying value applied on Nov during the first test is higher than the fair market value in Dec. Therefore, these 4 units are impaired again. |
3. How does impairment work for internal transfers?
Any transfer between wallets in a workspace is not seen as an acquisition or disposal, and therefore maintains the current cost basis for that lot.
4. Can I undo an impairment test to update the cost basis?
Yes, an undo function allows users to eliminate an impairment test and therefore update impairment values and overall cost basis for future testing.
5. Why there is no ‘Start date’ for the Impairment period?
This is replaced with just a singular test date. Our Impairment module allows you to select a date for the prices on that date. Your current lot cost basis is then compared against these prices for the selected date.
If you haven’t set up any Impairment test, the start date of the period will be the beginning of available import data in Cryptio. For example, if your imported data begins on 11 Dec 2019, the impairment test begins on that day too. You can then set the correct end date for your test.
Once you set up an Impairment test, the start date for the following test will be the end date of the previous period. In the example above, in this system you have:
- First impairment period: 11 Dec 2019 - 1 Jan 2020
- Second impairment period: 1 Jan 2020 - 31 Jan 2020 (preferred end date)
You can apply the most appropriate period valuation to your asset.
6. Is the module servicing both GAAP and IFRS needs?
Our Impairment module was built primarily for GAAP standards and best practices. Under GAAP, impairment losses cannot be reversed due to market value appreciation while IFRS does allow this reversal back up to original cost. In the event of market appreciation for IFRS clients, our module allows seamless removal of any impairment tests that were ran previously at a valuation below current market value and below cost.
7. Why is it important to complete your workspace and lock your data?
It affects all the cost basis for the period. The locked date is the last date you can run an impairment. But within that period you can run as many impairments as you want.
For example, if you run impairments up to December 2021 and realize some data was incomplete, your first instinct is probably to unlock the workspace. We would strongly advise against this.
The system won’t allow you to unlock a period prior to the last impairment or prior to the first impairment due to product control. If you really want to add new transactions and really want to unlock the workspace, you have to first undo all your impairments.
Feel free to reach out to the support team if you have any further questions about our Impairment module.