Which of the following statements is true regarding net book value, estimated future cash flows, and fair market value?

• A. Net book value is irrelevant in impairment testing.
• B. Net book value is used to determine if an impairment exists, while fair market value is used to calculate the impairment loss.
• C. Fair market value is always equal to net book value.
• D. Estimated future cash flows are always higher than fair market value.

Answer: (B)