If an asset is determined to be impaired, it should be:

Question

Quizplus · Accepted Answer

If an asset is impaired, it means that its carrying value exceeds its fair market value, and hence it should be written down to its fair market value. This is in accordance with the generally accepted accounting principle of conservatism, which requires that assets be stated at the lower of cost or market value. Choice A is incorrect because the method of depreciation is unrelated to impairment. Choice B is incorrect because it assumes that the asset is undervalued, which is not necessarily the case. Choice C is incorrect because impairment does not result in a liability, but rather a reduction in the carrying value of the asset.

If an Asset Is Determined to Be Impaired, It Should