Under what circumstances should a company record an asset impairment loss?
A)When residual value is greater than the repairs and maintenance expenses needed to keep up the asset.
B)When net book value is less than the residual value of the asset.
C)When accumulated depreciation equals the purchase cost of the asset.
D)When net book value is greater than expected future cash flows for the asset.

Question

Quizplus · Accepted Answer

A company should record an asset impairment loss when the net book value of the asset is greater than the expected future cash flows for the asset. This indicates that the asset is not likely to generate sufficient cash flows to recover its carrying amount, and therefore a loss should be recognized. The other options are not criteria for impairments.

Under What Circumstances Should a Company Record an Asset Impairment