The annual report for Costco Wholesale Corporation, the large discount company, contains the following statement:

The company periodically evaluates the realizability of long-lived assets for impairment when [circumstances] may indicate the carrying amount of the asset may not be recoverable.18

What does the concept of impairment mean in accounting? What effect does impairment have on profitability and cash flows? Why would the concept of impairment be referred to as a conservative accounting approach?


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