- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 7. Analysis of Long-Term Assets
- Subject 2. Impairment of Assets
CFA Practice Question
The amount of the loss required to be recognized for an impairment in the value of a long-lived asset should be the excess of the asset's carrying value over the ______.
B. acquisition cost
C. fair value
D. acquisition cost less the estimated future cash flows
A. undiscounted estimated future cash flows
B. acquisition cost
C. fair value
D. acquisition cost less the estimated future cash flows
Correct Answer: C
When the fair value is available, the loss on impairment is the difference between the carrying value and the fair value.
User Contributed Comments 5
| User | Comment |
|---|---|
| mrushdi | if fair value not available, then discount value of cash flows. |
| Renaud1807 | discounted value of CF!! |
| Vibis | tricky |
| johntan1979 | Answer A is used in recoverability test to determine impairment, not to calculate the loss. |
| quanttrader | fair value if known, otherwise discounted cash flows |