Asset impairment occurs when the fair value of a long-term asset exceeds its carrying value.

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Asset impairment occurs when the carrying value of a long-term asset exceeds its fair value, not the other way around as stated in option A. When the carrying value of an asset is higher than its fair value, it indicates that the asset is overvalued on the balance sheet, and impairment is necessary to adjust the value to its fair value. This impairment charge is recognized as an expense in the income statement and reduces the asset's carrying value on the balance sheet.

Asset Impairment Occurs When the Fair Value of a Long-Term