Final answer:
Property, plant, and equipment are recognized as impaired when their carrying amount exceeds their recoverable amount. This ensures the recorded value does not overstate the asset's economic potential and adjustments are made accordingly if impairment is detected.
Step-by-step explanation:
Property, plant, and equipment are considered impaired if the carrying amount exceeds the asset's recoverable amount. This concept is important in accounting to ensure that an asset's recorded value on a balance sheet is not greater than its potential to generate economic benefits. Impairment occurs when the future cash flows that an asset is expected to generate (its recoverable amount) are less than the asset's current carrying amount. When this situation arises, an impairment loss is recognized to write down the asset's carrying amount to its recoverable amount.