When the recoverable amount of a non-current asset falls below its carrying amount, what should be recognized?
Correct answer: B. An impairment loss
- A. A depreciation reserve increase
- B. An impairment loss
- C. A revaluation surplus
- D. A deferred tax asset
Explanation
An impairment loss is recognized when the asset's carrying amount exceeds its recoverable amount. This reduces the asset's carrying amount and is separate from ordinary depreciation.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
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