The impairment test for an intangible asset with a definite life compares the
A) fair value of the asset to its book value.
B) sum of the undiscounted cash flows expected to be generated by the asset to its book value.
C) sum of the discounted cash flows expected to be generated by the asset to its fair value.
D) sum of the undiscounted cash flows expected to be generated by the asset to its fair value.

Question

Quizplus · Accepted Answer

The impairment test for an intangible asset with a definite life involves comparing the sum of the undiscounted cash flows expected to be generated by the asset to its book value. If the sum of the expected cash flows is less than the asset's book value, then an impairment loss should be recognized. This test determines whether the asset is still able to generate sufficient future cash flows to recover its carrying amount.

The Impairment Test for an Intangible Asset with a Definite