Management may determine that an asset is impaired through the use of which of the following?
A)discounted cash flows.
B)internal rate of return.
C)Black Scholes modeling.
D)acid test ratios.

Question

Quizplus · Accepted Answer

Impairment is typically determined through discounted cash flows, which involve estimating the future cash flows expected to be generated by the asset and then discounting them back to their present value. This allows management to determine whether the current carrying value of the asset is greater than its recoverable amount, which is the higher of its fair value less costs to sell or its value in use. Internal rate of return and Black Scholes modeling are typically used to evaluate investment opportunities, while the acid test ratio is a liquidity ratio used to measure a company's ability to pay its short-term liabilities with its most liquid assets.

Management May Determine That an Asset Is Impaired Through the Use