When events or changes in circumstances reduce the estimated future cash flows of long-lived assets below their book value, the book values should be written down (by recording a loss) to the fair value of the assets.

Question

Quizplus · Accepted Answer

This statement is consistent with the accounting principle of impairment, which requires that assets be written down when their estimated future cash flows are reduced below their book value. This is done to ensure that the company's financial statements reflect the true economic value of the assets.

When Events or Changes in Circumstances Reduce the Estimated Future