Bottom-up and Top-down Tests
In many scenarios, the functionality of an item can be directly assessed for its intended purpose. For example, when purchasing an electric bulb, we test it to see if it works directly, and this straightforward test provides immediate satisfaction. This method is known as a bottom-up test. Conversely, in situations like a bypass operation, the functionality of the newly introduced unit is assessed by examining the performance of the entire system. This comprehensive testing method is referred to as a top-down approach.
People often associate bottom-up and top-down tests with fields like software development and management studies. However, these concepts are also relevant in accounting. When testing for impairment, a bottom-up test is performed first. If this initial test indicates a failure, a top-down test is then conducted. These tests are not applied simultaneously but sequentially, with the top-down test being used only if the bottom-up test fails. This methodical approach ensures accurate assessment of asset impairment in accounting.
By CA L.Muralidharan and CPA L.Mukundan
Visit www.sreeramcoachingpoint.com for more blogs
Contact: 6383228202 or 9884439769
Also use our app Gyanji for more utility and benefits
Best place of coaching for CPA, CMA USA & CA
