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Basic Question 4 of 15
Which of the following is evidence that a loss due to value impairment must be recognized?
II. There are adverse changes in the legal or business climate.
III. There are significant cost overruns.
I. There is a forecast of a significant decline in the profitability of an asset.
II. There are adverse changes in the legal or business climate.
III. There are significant cost overruns.
User Contributed Comments 9
| User | Comment |
|---|---|
| cong | What are cost overruns? |
| reganbaha | It happens when costs over-run |
| swisha | ^^haha, very insightful. Thanks. |
| johntan1979 | Actually I don't understand how cost overruns can or should impair an asset. Is it because during cost overruns, you typically overuse the asset (beyond ordinary usage)? |
| robertucla | I'm not finding cost over runs in CFA text. Anybody? |
| vrutikap | You overrun costs when you exceed your budget |
| jrojasut09 | costs have an effect on the undiscounted cash flows. if a company costs go over budget and carrying value>cash flows, then an impairment must be recognized |
| UcheSam | Cost overrun in terms of spending more on maintenance for continuous use of the asset. This reduces the expected future flow of revenue. |
| alexa821 | i dont like the word "must" in this question..seems too strong to me |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
explain and evaluate how impairment and derecognition of property, plant, and equipment and intangible assets affect the financial statements and ratios
CFA® 2025 Level I Curriculum, Volume 2, Module 7.