In testing for recoverability of property, plant, and equipment, an impairment loss is required if the:
A) Asset's book value exceeds the undiscounted sum of expected future cash flows.
B) Undiscounted sum of its expected future cash flows exceeds the asset's book value.
C) Present value of expected future cash flows exceeds its book value.
D) All of these answer choices are incorrect.

Question

Quizplus · Accepted Answer

According to ASC 360-10-35-17, an impairment loss is required if the asset's book value exceeds the undiscounted sum of expected future cash flows. This is because the carrying value of the asset is not supported by its expected future economic benefits, as represented by the expected future cash flows. Therefore, an impairment loss must be recognized to write down the carrying value of the asset to its estimated fair value.

In Testing for Recoverability of Property, Plant, and Equipment, an Impairment