Homework Answers
An impairment of loss can happen due to many reasons. When impairment of loss to assets happen, the difference in value of market value to book value will be negative.
a) asset damaged badly: when a asset is damanged badly due to some reason. Then the market value of asset reduces. For example: a building collapsed due to hurricane. Then market value will be lesser than book value
b) asset price reduced: due to low demand or due to some invention of alternative product, if the asset loses demand in the market. Then the market value will be lower than book value. In this case, impairment loss of asset happens
c) legal issues impact: if there are any legal issues revolving around the asset. Then no one would be willing to purchase the asset. Even this can cause impairment loss to asset
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