Abacus Inc., a public corporation, owns equipment for which the following year-end information is available: Carrying amount: $59,000
Recoverable amount: $52,000
Which of the following best describes the proper accounting treatment for Abacus's equipment?

Question

Quizplus · Accepted Answer

When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired, and an impairment loss must be recognized. This loss reflects the decline in the future economic benefits or service potential of the asset. However, under certain accounting frameworks, such as IFRS, if conditions change and the reasons for the impairment no longer apply, the impairment loss may be reversed in future periods, subject to specific conditions and limitations.