CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Under U.S. GAAP, impairment of an asset must be recognized in a firm's accounts when ______
A. there has been a decrease in the market value of the asset.
B. the carrying value of the asset is higher than the expected future cash flows from the use of the asset plus its disposal value.
C. the carrying value of the asset is higher than the present value of expected future cash flows from the use of the asset plus its discounted disposal value.
Explanation: A does not automatically lead to a write-down if the value of the asset can be recovered through future cash flows.

C is not correct; this is one of the calculations that can be done to work out the size of the loss on an impaired asset.

User Contributed Comments 1

User Comment
gill15 Recoverability test

Carrying value > the undiscounted CF's
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