In accounting, the term 'impairment' refers to:

• A. An increase in the market value of an asset above its historical cost.
• B. The revaluation of an asset to its fair market value at year-end.
• C. The routine depreciation of an asset over its useful life.
• D. A permanent reduction in the recoverable amount of an asset below its carrying amount.

Answer: (D)

Verified step by step guidance

1. Understand the concept of impairment: Impairment occurs when the recoverable amount of an asset is less than its carrying amount, indicating a permanent reduction in the asset's value.
2. Recognize that impairment is not related to routine depreciation, which is the systematic allocation of an asset's cost over its useful life.
3. Differentiate impairment from revaluation: Revaluation adjusts an asset's value to its fair market value, whereas impairment reflects a permanent decline in value.
4. Note that impairment is not an increase in market value above historical cost; it specifically refers to a reduction in value below the carrying amount.
5. Conclude that impairment is a permanent reduction in the recoverable amount of an asset below its carrying amount, as stated in the correct answer.