CFA Practice Question

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CFA Practice Question

The information below applies to a manufacturing equipment held for use:

Carrying value: $200k
Undiscounted future cash flows: $220k
Discounted future cash flows: $180k
Fair value: $170k

Under U.S. GAAP, how much should the impairment loss be?
Correct Answer: Zero

Since the carrying value is less than the undiscounted future cash flows, no impairment loss should be recognized.

User Contributed Comments 5

User Comment
cong Very good question.
endurance cong, you're right
johntan1979 i'm lovin' it
davcer sometimes you go directly to the calculations without verifying if u really need it.
Sp1993 Bloody good question. Lesson to be learnt - don't jump straight in to the calculations when you see indicative figures, take a step back and look for what the question is really testing.
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