Question

An asset group is being evaluated for an impairment loss. The following financial information is available for the asset group: Carrying value $100,000,000 Sum of the undiscounted cash flows $95,000,000 Fair value $80,000,000 What amount of impairment loss, if any, should be recognized

Answer 1

The amount of the impairment loss that should be recognized is:

$20,000.

Step-by-step explanation:

a) Data and Calculations:

Undiscounted cash flows = $95,000

Carrying value = $100,000

Fair value = 80,000

Impairment loss = $20,000

b) Impairment loss for the asset group is the difference between the fair value and the carrying value. It is recognized when the fair value declines from the carrying value. This implies that the calculation to determine the impairment loss is achieved by deducting the fair value from the carrying value.