Question

A company has experienced operating losses from its appliances division for the past five years. The division is the lowest level of identifiable cash flows. Having determined the division is the lowest level of identifiable cash flows, the company's next step in performing its impairment test is to _____

Answer 1

Answer:

check for recover ability and see whether the carrying amount is greater than fair value or not.

Explanation:

An impairment test is done when due to some changes it looks like carrying amount of some long lived asset of company ( in this case division of company ) is unrecoverable. So the first step would be to check for recover ability , where carrying amount would be compared to the cash flow which is expected from it in the future , if the asset is used or if it is disposed . The next step would be to recognize impairment loss which will take place when carrying amount is greater than the fair value.