Firms recognize an impairment loss when the carrying amount of a tangible fixed asset is deemed "not recoverable" as specified by GAAP.GAAP defines a carrying amount as "not recoverable" if:
A) it is greater than the sum of the cash flows expected from the asset's use and disposal.
B) it is greater than the sum of the undiscounted cash flows expected from the asset's use and disposal.
C) it is less valuable than its current carrying value.
D) it is less valuable than its current fair value.

Question

Quizplus · Accepted Answer

According to GAAP, a carrying amount is deemed "not recoverable" if it is greater than the sum of the undiscounted cash flows expected from the asset's use and disposal. This means that the asset is not expected to generate enough cash flows in the future to cover its carrying value, and therefore an impairment loss should be recognized. Choices A, C, and D do not accurately reflect GAAP's definition of when an asset's carrying amount is "not recoverable."

Firms Recognize an Impairment Loss When the Carrying Amount of a Tangible