[2] In United States GAAP, the Financial Accounting Standards Board (FASB) introduced the concept in 1995 with the release of SFAS 121.
An investment is recognized as impaired when there is no longer reasonable assurance that the future cash flows associated with it will be collected either in their entirety or when due.
Such triggering events include when the entity[11] – If such evidence exists, the next step is to estimate the recoverable amount of investments.
[13][14] Estimates of future cash flows used to determine the present value of an investment are made on a continuous basis and do not rely on a triggering event to occur.
These revised expected cash flows are discounted at the same effective interest rate used when the instrument was first acquired, therefore retaining a cost-based measurement.