leverage ratio and impairment

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toronto_1

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if impairment is recognized, it would reduce future depreciation and increase future Net income, and thus decrease leverage ratio (total asset/total equity).

Am i right? because book 6 volume 1 pm question 58 seems to have an error.
thanks in advance!
 
your assets would also reduce, possibly by a higher amount than the decrease in the future Net income. So your leverage would possibly reduce, than it would increase.

CP
 
oh right, asset reduces more since depreciation is only going to be a percentage of the reduction in asset. thanks!!
 
How does an asset impairement reduce net income? From the income that was expected to be generated from that asset? Thanks,
 
Lower depr (due to impairment) would inc net income.
 
Ohhh right I knew that too, after studying so long you can't even think straight anymore. Thanks for your help.
 
so impairment all else equal decreases leverage ratio?
 
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