Which of the following is a correct statement about asset impairment?
A) An asset is impaired if the net book value exceeds the estimated future cash flows.
B) If an asset is impaired, the future cash flows will be less than the fair value.
C) Under GAAP, an asset that has been written down because of impairment can be written back up if it increases in value in the future.
D) If an asset is impaired, the impairment loss is the difference between the net book value and the fair value.

Question

Quizplus · Accepted Answer

If an asset is impaired, the impairment loss is the difference between the net book value and the fair value. Choice A is incorrect because an asset is impaired if the estimated future cash flows are less than the book value. Choice B is also incorrect because the fair value is compared to the book value to determine if there is impairment. Choice C is partially correct, but under GAAP, a written-down asset can only be written back up if there is evidence of an increase in value due to a specific event, not just general market conditions.

Which of the Following Is a Correct Statement About Asset