Question

question 1
the wall street journal article reports that exxon mobils annual loss was driven by a more than $19 billion write - down. what is another accounting term for a write - down?
a change in an assets estimated useful life.
an impairment loss.
a loss from selling an asset.
regular annual depreciation.
question 2
the article mentions that lower oil prices caused companies to write down the value of their assets. according to the textbooks rules for impairment, why would a drop in oil prices trigger this process?
it suggests the assets will generate less cash in the future.
it means the company must sell the assets immediately.
it erases the depreciation that was taken in past years.
it lowers the original cost of the assets.

Explanation:

• Question 1: A write - down in accounting is when the value of an asset is reduced. An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. A change in an asset's estimated useful life affects depreciation calculations but is not the same as a write - down. A loss from selling an asset is a realized loss upon disposal, and regular annual depreciation is a systematic allocation of an asset's cost over its useful life, not a one - time significant reduction like a write - down.
• Question 2: According to impairment rules, an asset is impaired if its carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use (present value of future cash flows). Lower oil prices suggest that the assets (e.g., oil - related assets) will generate less cash in the future (value in use decreases), which can trigger an impairment write - down. A drop in oil prices does not mean the company must sell the assets immediately. It also does not erase past depreciation (depreciation is a past expense allocation) and does not lower the original cost of the assets (original cost is a historical amount).

Answer:

• Question 1: An impairment loss.
• Question 2: It suggests the assets will generate less cash in the future.