Which of the following is not an acceptable measure of the impairment of a note receivable?
A)the difference between the present value of the note using the contract interest rate and the carrying value of the note
B)the difference between the note's market value and its carrying value
C)the difference between the fair market value of the note's collateral and the note's carrying value
D)the difference between the note's maturity value and its carrying value

Question

Quizplus · Accepted Answer

The maturity value of a note receivable is not a relevant measure of impairment. The impairment should be measured by the present value of cash flows expected to be collected, which can be determined by comparing the carrying value of the note to the present value of expected future cash flows using the effective interest rate, or by comparing the fair value of the note to its carrying value. The value of collateral may also be considered in determining impairment.

Which of the Following Is Not an Acceptable Measure of the Impairment