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Revaluation Model

[Important: As long as a company handles impairment costs responsibly, investors can see accurate valuations of the company.]

With so many variables and inferences involved with determining amortization and the life expectancy of an intangible asset, however, impairment cost can be used to manipulate the balance sheet. One of the main factors contributing to manipulation is the fact that declared values of intangible assets are not required to be reported.

Key Takeaways

  • Amortization and impairment both relate to the value of a company’s intangible assets, which are reported on the balance sheet.
  • The idea behind amortization is that it illustrates the expense of using up an intangible asset’s value to produce revenue.
  • With so many variables and inferences involved with determining amortization and the life expectancy of an intangible asset, however, impairment cost can be used to manipulate the balance sheet.