When You Base Your Depreciation Estimate on the "Effective Age

question 9

True/False

When you base your depreciation estimate on the "effective age" of the building rather than the actual age, you are relying on an estimate of the market's view of the property.

---

Definitions:

Impairment Loss

A charge to the income statement that occurs when the carrying amount of an asset exceeds its recoverable amount, indicating the asset is not expected to generate future economic benefits.

Recoverable Amount

The higher value between an asset's fair value less costs to sell and its value in use.

Carrying Amount

Carrying amount is the value at which an asset is recognized in the balance sheet after deducting accumulated depreciation and impairment losses.

Revaluation Model

An accounting method that allows assets to be carried at a revalued amount, reflecting their fair value at the date of revaluation.