Impairment of Intercorporate Investments

In the context of intercorporate investments, companies often invest in other companies. Sometimes, these investments experience a decrease in value, which may trigger an impairment. Under the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), impairment occurs when the carrying amount of an asset exceeds its recoverable amount.

Which of the following statements accurately describes the process of determining whether an investment in another company is impaired?