Under what circumstance should a company record an asset impairment loss?
A)When residual value is greater than the repairs and maintenance expenses needed to keep 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

An asset impairment loss should be recorded when the net book value of an asset is greater than expected future cash flows for the asset. This indicates that the asset's carrying amount on the balance sheet is higher than its recoverable amount, which is the higher of its fair value less costs to sell or its value in use. In this situation, the company must recognize an impairment loss to reduce the carrying amount of the asset to its recoverable amount.

Under What Circumstance Should a Company Record an Asset Impairment