Asked by Callie Little-Davis on Jul 15, 2024
Verified
An impairment loss occurs when:
A) the asset has a residual value of zero.
B) the recoverable amount of an asset exceeds the carrying amount.
C) the carrying amount of an asset exceeds the recoverable amount.
D) the recoverable amount of an asset exceeds its initial cost.
Impairment Loss
A charge to the income statement that occurs when the carrying amount of an asset exceeds its recoverable amount, indicating the asset is not expected to generate future economic benefits.
Recoverable Amount
The higher value between an asset's fair value less costs to sell and its value in use.
Carrying Amount
Carrying amount is the value at which an asset is recognized in the balance sheet after deducting accumulated depreciation and impairment losses.
- Understand the calculation and accounting treatment of impairment losses under AASB 136.
Verified Answer
MK
Morgan KraskaJul 15, 2024
Final Answer :
C
Explanation :
An impairment loss occurs when the carrying amount of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The recoverable amount is the amount that can be recovered through the use or sale of the asset. Therefore, option C is the correct answer. Options A and D are incorrect because they pertain to the residual value and initial cost of an asset, respectively. Option B is also incorrect because it states the opposite of the correct condition for an impairment loss.
Learning Objectives
- Understand the calculation and accounting treatment of impairment losses under AASB 136.