UK Classifying impairment

[skd123]

Hello Everyone
Hope you are well.
I am trying to understand the basic laws of creating statements, and am currently looking into the relation between income statement and the statement of financial position.

To account depreciation resulting from impairment of equipment that was used for producing inventory, I hear the cost of sales is increased, which tackles income.

However, when I try to do the same for Financial Position, I get stuck. It appears quite obvious that non-current assets - equipment is affected, but then what next? Equity? How to clasify (name) the cost?

Thank you.

 

[skd123]

Here is what I think it should be in the statement of financial position:

On the one hand, non-current assets (equipment) would go down, on the other, equity - each time by the same amount. Is that right?

I hope my post 2 combined with one makes the whole thread compliant with the rules.

Thank you.

 

[Fidget]

The net book value (NBV) of the asset in the balance sheet (SoFP), is reduced by the amount of the impairment (current NBV minus impairment = new book value). You do that by adding the impairment amount to the accumulated depreciation account in the balance sheet.

Remember that going forward, the normal depreciation charge for the asset that has been impaired will be based on the written down value of the asset.