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CFA Level 2
Financial Reporting and Analysis

Impairment of Intercorporate Investment

Medium Intercorporate Investments Impairment Of Investments

As part of its annual review, XYZ Corporation assessed its investment in ABC Ltd., a company it acquired two years ago. Initially recorded at $5 million, the investment has been generating lower-than-expected returns due primarily to a downturn in the industry. During the review, XYZ determined that the fair value of its investment in ABC Ltd. is now $3 million. Given this information, which of the following statements is correct regarding the impairment of the investment?

Hint

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