When an asset is measured at fair value, the appropriate journal entry to record an impairment loss will include which of the following entries?

Question

BlackTom AI · Accepted Answer

First, let's consider what happens when an asset's value is impaired and measured at fair value.
Option a: DR Loss on revaluation - downward revaluation of asset. This wording suggests a loss recognized specifically as a revaluation decrease and typically would affect a revaluation reserve or OCI, depending on accounting policy. However, impairment losses are not recorded as a revaluation loss; they are recognized in profit or loss as impairment. So this option mischaracterizes the nature of the accounting entry for impairment under most frameworks.
Option b: DR Asset. Debiting the asset without crediting an impairment-related account would simply reduce the asset but does not reflect an expense recognition. Impairment losses are expensed through an impairment loss account, not by directly writing down the asset without recognizing a corresponding expense, so this entry is incomplete.
Option c: DR Impairment loss. This matches the standard practice: recognize the impairment loss in the income statement by debiting an impairment loss (P&L) and crediting the asset to reduce its carrying amount to the recoverable amount. This correctly reflects the expense and the reduction in asset value.
Option d: DR Revaluation increment - upward revaluation of asset. This option describes an upward revaluation entry, which would increase the asset or relate to a revaluation surplus in equity, not an impairment scenario. Since we are dealing with impairment (a decrease in value), this entry is inappropriate.
In summary, option c correctly represents recognizing an impairment loss as an expense and reducing the asset’s carrying amount, while the other options either misstate the nature of impairment, omit the expense recognition, or describe the opposite process (upward revaluation).

When an asset is measured at fair value, the appropriate journal entry to record an impairment loss will include which of the following entries?单项选择题

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