an asset is impaired when the asset's carrying value is course hero

In the United States, assets are considered impaired when the book value, or net carrying value, exceeds expected future cash flows. This occurs if a business spends money on an asset, but changing circumstances caused the purchase to become a net loss. Several acceptable testing methods can identify impaired assets.

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When is an entity required to assess if an asset may be impaired?

View full document. See Page 1. An asset is impaired when the asset's carrying value is: Select one: A. Greater than the sum of discounted expected cash flows B. Less than the sum of discounted expected cash flows C. Less than the sum of undiscounted expected cash flows D. Greater than the sum of undiscounted expected cash flows E. None of the above Feedback …

How is the recoverable amount determined for impaired corporate assets?

See the answer. See the answer See the answer done loading. An asset is impaired when the asset’s carrying value is. Select one: a. Greater than the sum of discounted expected cash flows. b. Less than the sum of discounted expected cash flows. c. Less than the sum of undiscounted expected cash flows.

What is recovery of impairment for a tangible long lived asset?

Accounting questions and answers. An asset is impaired when the asset's carrying value is: a. greater than the sum of discounted expected cash flows. b. less than the sum of discounted expected cash flows. c. less than the sum of undiscounted expected cash flows. d. greater than the sum of undiscounted expected cash flows e. none of the above. Question: An asset is …

Why does the recoverable amount become higher than the carrying amount?

12. An asset impairment occurs when the asset's carrying amount exceeds the: A. asset's book value. B. asset's fair value. C. expected future net cash flows. D. present value of expected future net cash flows. When the expected future net cash flows is less than the carrying amount of the asset, the asset is considered impaired. 10/26/2009 ...

At what point is an asset considered to be impaired?

In the United States, assets are considered impaired when the book value, or net carrying value, exceeds expected future cash flows. This occurs if a business spends money on an asset, but changing circumstances caused the purchase to become a net loss.

What causes an asset to be impaired?

An asset may become impaired as a result of materially adverse changes in legal factors that have changed the asset's value, significant changes in the asset's market price due to a change in consumer demand, or damage to its physical condition.

Does carrying value include impairment?

Carrying amount is the value of an asset as it appears on the balance sheet and is acquired, after deducting its accumulated depreciation and impairment expenses.

What is the carrying value of a depreciable asset?

Carrying amount, also known as carrying value, is the cost of an asset less accumulated depreciation. The carrying amount is usually not included on the balance sheet, as it must be calculated. However, the carrying amount is generally always lower than the current market value.

What is impairment of asset with example?

This often occurs when the asset is depreciated or amortized at an underestimated amount or following a decline in the asset's market value. For example, a food company purchased a packaging machine at $100,000 two years ago and depreciates it at $5,000 every year.

What is impairment and examples?

Impairment in a person's body structure or function, or mental functioning; examples of impairments include loss of a limb, loss of vision or memory loss. Activity limitation, such as difficulty seeing, hearing, walking, or problem solving.

What does impairment mean in accounting?

a permanent reduction in the valueIn accounting, impairment is a permanent reduction in the value of a company asset. It may be a fixed asset or an intangible asset. When testing an asset for impairment, the total profit, cash flow, or other benefit that can be generated by the asset is periodically compared with its current book value.

What financial assets are assessed for impairment quizlet?

What financial assets are assessed for impairment? Investment in equity instrument that is not held for trading.

How do you calculate carrying value in accounting?

Divide the difference by the number of years you expect the asset to function well. The quotient is the depreciation amount, which accumulates with every year of asset use. At the end of the asset's useful life, subtract the total accumulated depreciation to determine the carrying value.Jun 10, 2021

What are impairment losses?

Impairment loss: the amount by which the carrying amount of an asset or cash-generating unit exceeds its recoverable amount. Carrying amount: the amount at which an asset is recognised in the balance sheet after deducting accumulated depreciation and accumulated impairment losses.

Is carrying value a liability?

What is the Carrying Amount? The carrying amount is the recorded cost of an asset, net of any accumulated depreciation or accumulated impairment losses. The term also refers to the recorded amount of a liability.Mar 15, 2022

What does loss of impairment mean?

An impairment loss is a recognized reduction in the carrying amount of an asset that is triggered by a decline in its fair value. When the fair value of an asset declines below its carrying amount, the difference is written off.May 10, 2017