Question

CRITICALLY EVALUATE IMPAIRMENT RULES AS THEY APPLY TO BOTH TANGIBLE AND INTANGIBLE ASSETS AND ASSESS TO WHAT EXTENT THEY CONTRIBUTE TO MAKING FINANCIAL STATEMENTS TRUE OR FAIR

Answer 1

Impairment occurs when a business asset suffers a depreciation in fair market value in excess of the book value of the asset on the company's financial statements.

Under the U.S. generally accepted accounting principles (GAAP) assets considered impaired must be recognized as a loss on an income statement.

The technical definition of impairment loss is a decrease in net carrying value of an asset greater than the future undisclosed cash flow of the same

Assets should be tested for impairment on a regular basis to prevent overstatement on the balance sheet.

Assets that are most likely to become impaired include accounts receivable, as well as long-term assets such as intangibles and fixed assets.

When an impaired asset's value is written down on the balance sheet, there is also a loss recorded on the