For several years, a number of Food Lion, Inc., grocery stores were unprofitable. The company
closed, and continues to close, some of these locations. It is apparent that the company will not be
able to recover the cost of the assets associated with the closed stores. Thus, the current value of
these impaired assets must be written down (see the Case in Point on page 381).
A recent Food Lion income statement reports a $9.5 million charge against income pertaining
to the write-down of impaired assets.
a. Explain why Food Lion must write down the current carrying value of its unprofitable stores.
b. Explain why the recent $9.5 million charge to write down these impaired assets is considered
a noncash expense.
Assets are said to be impaired when the present values of the expected future benefits from such assets are lower that the recorded book value. When an asset is impaired it needs to be revalued at the ...
The solution examines the Food Lion, Inc. income statements. THe solution determines why Food Lion must write down the current carrying value of its unprofitable stores.