Torque Co. has equipment with a carrying amount of $1,600,000. The expected future net cash flows from the equipment are $1,630,000, and its fair value is $1,360,000. The equipment is expected to be used in operations in the future. What amount (if any) should Torque report as an impairment to its equipment?

Question

Quizplus · Accepted Answer

Under U.S. GAAP, an impairment loss is recognized only if the carrying amount of the asset is not recoverable and exceeds the fair value. The recoverability test compares the carrying amount of the asset to the sum of the expected future net cash flows. Since the expected future net cash flows ($1,630,000) exceed the carrying amount ($1,600,000), no impairment is required.

Torque Co Has Equipment with a Carrying Amount of $1,600,000