Which of the following is an impairment indicator that may require a write-down of a fixed asset?

• A. Significant declines in market value
• B. Increase in market value
• C. Obsolescence without loss
• D. Improved efficiency

Answer: (A)

Impairment indicators come from signals that an asset’s future cash flows or value may have fallen below its carrying amount. A significant decline in market value directly suggests the asset’s recoverable amount could be lower than what it’s carried at, so you would check if the carrying amount exceeds the recoverable amount (the higher of fair value less costs of disposal and value in use). If it does, an impairment loss is recognized by writing the asset down to the recoverable amount.

The other options don’t point to an impairment in this context: an increase in market value would raise, not lower, the recoverable amount; improved efficiency tends to increase value; obsolescence is a potential indicator, but the phrase “without loss” means it isn’t yet showing a decline in recoverable amount in this scenario.