Which of the following best describes the relationship between net book value, estimated future cash flows, and fair market value in the context of asset impairment?

• A. Estimated future cash flows are always higher than net book value.
• B. Net book value is compared to estimated future cash flows to determine impairment; fair market value is used to calculate the impairment loss.
• C. Net book value is always lower than fair market value.
• D. Fair market value is irrelevant in impairment testing.

Answer: (B)