The impairment test involves comparing the asset's:
A)carrying amount with its fair value.
B)carrying amount with its recoverable amount.
C)fair value with its residual value.
D)fair value with its replacement cost.

Question

Quizplus · Accepted Answer

The impairment test involves comparing the carrying amount of the asset (the amount at which the asset is recognized in the company's balance sheet) with its recoverable amount (the higher of its value in use or fair value less costs to sell). If the carrying amount is higher than the recoverable amount, the asset is considered impaired and the company must recognize an impairment loss in its financial statements. Therefore, option B is the best choice as it correctly describes the basis for impairment testing.

The Impairment Test Involves Comparing the Asset's