Toro Co. has equipment with a carrying amount of \(700,000. The expected future net cash flows from the equipment are \)705,000, and its fair value is $590,000. The equipment is expected to be used in operations in the future. What amount (if any) should Toro report as an impairment to its equipment?

According to a company's financial statement, the fair value represents the estimated value of its assets and liabilities. Fair market value refers to an item's sale value that is fair for the buyer and the seller. In other words, it is the 'potential price' of an asset or debt rather than its historical price or market value.

According to the recoverability test, impairment occurs when the carrying value of an asset exceeds the projected future net cash flows from the asset. The expected future net cash flows of $705,000 exceed the $700,000 carrying value of the equipment. As a consequence, despite the equipment's $590,000 fair value, no impairment is judged to have occurred, and there is no assessment or acknowledgment of the loss.