Final answer:
Under U.S. GAAP, the reversal of a write-down is prohibited, establishing a conservative approach where increases in asset values after a write-down are not recognized until sale or disposal.
Step-by-step explanation:
Under U.S. Generally Accepted Accounting Principles (GAAP), the reversal of a write-down is prohibited. When an asset is written down to reflect an impaired value, the reduced asset value becomes the new cost basis. Unlike International Financial Reporting Standards (IFRS), which allow the reversal of asset write-downs when the value of the asset recovers, U.S. GAAP maintains a conservative approach where increases in the value of the asset after a write-down are not accounted for until the asset is sold or disposed of.
Write-down reversals are not recognized in the financial statements under U.S. GAAP. This approach is intended to prevent earnings management and overstatements of financial positions. For companies reporting under U.S. GAAP, this has implications for how they assess and report on their assets' recoverability and the associated impairment charges.