What is the formula for calculating impairment loss under US GAAP?

The formula for calculating impairment loss under US GAAP is based on the difference between the fair value of an asset and its carrying value. When an asset's carrying value exceeds its fair value, the asset is considered impaired, and the loss is recognized. Therefore, the correct formula is fair value minus carrying value.

In this context, fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The carrying value, on the other hand, is the value at which an asset is recognized on the balance sheet, typically its historical cost less any accumulated depreciation or amortization.

Using this formula aids in ensuring that assets are not reported at values greater than what they could be sold for in the market, thereby providing more accurate financial statements. This approach aligns with the overall objective of financial reporting, which is to provide relevant and reliable information to users of financial statements.