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 amortization 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 the expected future cash flows for the asset. This means that the asset is not worth its carrying value and its value has decreased due to changes in market conditions, technology, or other factors. The impairment loss is the difference between the net book value and the fair value of the asset, and should be recognized in the income statement as a separate line item.

Under What Circumstance Should a Company Record an Asset Impairment