The economic value of a tangible asset may decline below its book value but an impairment loss would not be recognized when the
A)undiscounted future cash flows exceed its book value.
B)undiscounted future cash flows exceed its market value.
C)discounted future cash flows exceed its book value.
D)discounted future cash flows exceed its market value.
E)discounted future cash flows exceed its liquidation value.

Question

Quizplus · Accepted Answer

According to accounting standards, impairment loss is recognized when the recoverable amount of an asset (either its market value, discounted cash flows, or liquidation value) is less than its carrying amount (book value). However, if the undiscounted future cash flows of a tangible asset exceed its book value, it means that the asset is still capable of generating sufficient cash flows to recover the carrying amount, and therefore no impairment loss needs to be recognized.

The Economic Value of a Tangible Asset May Decline Below