How is fixed-asset carrying value computed under US GAAP?

The carrying value of fixed assets under US GAAP is primarily calculated using the historical cost model. This involves taking the initial historical cost of the asset as recorded on the balance sheet and then subtracting accumulated depreciation, which reflects the wear and tear or usage of the asset over time. Additionally, if the asset has experienced any impairments—meaning its recoverable amount has declined significantly—those impairment losses are also deducted from the historical cost.

Thus, the correct formula incorporates both accumulated depreciation and impairment losses, leading to the computation of carrying value as historical cost minus accumulated depreciation and minus any impairment. This comprehensive approach ensures that the carrying value reflects any decrease in the asset's value that might have occurred since its acquisition, providing a more accurate representation of its worth on the balance sheet.

In contrast, other options do not align with the requirements set forth by US GAAP. For instance, relying solely on historical cost minus accumulated depreciation fails to account for potential impairment, which can lead to an overstatement of an asset's value.