After impairment is recognized, what is the expected effect on future depreciation expense?

• A. It increases.
• B. It remains unchanged.
• C. It decreases because the asset base is reduced.
• D. It becomes zero.

Answer: (C)

When impairment is recognized for a depreciable asset, the carrying amount is reduced to its recoverable amount. Depreciation in future periods is then calculated using this revised carrying amount over the remaining useful life (minus any residual value). Since the asset base is smaller, the amount allocated to depreciation each year tends to be lower, assuming the remaining life and residual value remain unchanged. It wouldn’t rise or stay exactly the same simply because impairment occurred, and it wouldn’t drop to zero unless the asset is fully depreciated or disposed.