Once an asset is impaired,
A)annual depreciation expense is the same
B)accumulated depreciation needs to be adjusted
C)subsequent years' depreciation expense is based upon changes in the asset's fair value
D)the reduced book value is used to compute future years' depreciation

Question

Quizplus · Accepted Answer

Once an asset is impaired, the reduced book value (original cost - accumulated depreciation - impairment loss) is used to compute future years' depreciation. The annual depreciation expense will be adjusted to reflect the new book value. The accumulated depreciation is not adjusted retroactively but will increase going forward based on the reduced book value. The subsequent years' depreciation expense may or may not be based upon changes in the asset's fair value, depending on the depreciation method used.

Once an Asset Is Impaired