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What is the impact of impairments on plant assets (tangible assets) in terms of professional judgment?

1) Impairments have no impact on plant assets
2) Impairments decrease the value of plant assets
3) Impairments increase the value of plant assets
4) Impairments have no impact on professional judgment

1 Answer

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Final answer:

2) Impairments decrease the value of plant assets. Impairments decrease the value of plant assets.

Step-by-step explanation:

The impact of impairments on plant assets (tangible assets) in terms of professional judgment is that impairments decrease the value of plant assets. When a plant asset becomes impaired, it means that its carrying value exceeds its recoverable amount. The carrying value is the original cost of the asset minus accumulated depreciation, while the recoverable amount is the higher of the asset's fair value less costs to sell or its value in use. Impairments require professional judgment to assess the decline in value and properly account for it on the financial statements.

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