A company would need to record an impairment loss for its equipment when:
A) the original cost of the equipment exceeds its fair value and is deemed not recoverable.
B) management determines that the equipment will no longer be used.
C) the carrying amount of the equipment exceeds its fair value and is deemed not recoverable.
D) the cash flows from the equipment are less than its fair value.

Question

Quizplus · Accepted Answer

An impairment loss for equipment must be recorded when the carrying amount (original cost less accumulated depreciation) exceeds the fair value of the asset and is deemed not recoverable. This means that the company does not expect to recover the cost of the equipment through the future use or sale of the asset. Option A is incorrect because the original cost of the equipment is not relevant to whether an impairment loss should be recorded. Option B is not necessarily true as the company may still record the equipment as impaired while still using it. Option D is incorrect because cash flows from the equipment are not directly used to determine if an impairment loss should be recorded.

A Company Would Need to Record an Impairment Loss for Its