In EOC problem 3 for reading 18 - long lived assets.
“In 2009, AMRC recognized an impairment loss of €50 million on a fleet of locomotives. The impairment loss was reported as ‘other income’ in the income statement and reduced the carrying amount of the assets on the balance sheet.”
Question:
With respect to Statement 3, what is the most likely effect of the impairment loss? A Net income in years prior to 2009 was likely understated.
B Net profit margins in years after 2009 will likely exceed the 2009 net profit margin. C Cash flow from operating activities in 2009 was likely lower due to the impairment loss.
Answer is B.
If other income is same is other Comprehensive income, it is below Net Income. and it shouldn’t affect net income.
Bit confused here.