Practice prompt · Q:long-lived-asset-estimates-and-exits/recoverability-screen-001

Run the screen before measuring an impairment

Tests whether the learner uses undiscounted cash flows for the held and used screen and fair value only for measurement.

Updated Sep 11, 2026 Review due Nov 18, 2026

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An asset group held and used has a carrying amount of 4,200,000. Undiscounted future cash flows are estimated at 4,350,000. Fair value is estimated at 3,600,000.

Students find this case hardest to accept. Fair value falls a long way and nothing is recorded. The screen exists so that an asset the entity will recover through use is not written down for a price it has no intention of accepting.

Choose the best answer. a No impairment loss is recorded, because undiscounted cash flows exceed the carrying amount. b A loss of 600,000, the excess of carrying amount over fair value. c A loss of 150,000, the difference between the carrying amount and undiscounted cash flows. d A loss of 600,000, because fair value is the relevant measure for an asset in use.

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Answer: a

Choice a. The screen passes, so no loss is recorded even though fair value is well below carrying amount.