The economic value of a building 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

An impairment loss would not be recognized when the undiscounted future cash flows exceed its book value. This is because impairment occurs when the carrying amount of a long-lived asset exceeds its fair value, and the fair value is determined by the discounted cash flows. However, if the undiscounted future cash flows exceed the book value, it indicates that the asset is still generating enough cash to cover its cost, even if the market value has declined. Therefore, no impairment loss would be recognized in this scenario.

The Economic Value of a Building May Decline Below Its