A tornado hit the City of Fairview. City hall was closed six months for renovation, during which time city operations were moved to meeting rooms at a nearby convention center. Further details include:

1. Mold remediation involved removal and rebuilding of the interior walls at a cost of $447,000. This did not extend the useful life of the building.

2. Water damaged all hardwood floors, which were replaced at a cost of $175,000.

3. Rent for the convention center meeting rooms cost $95,000, and relocation costs were $75,000.

4. Reduced productivity of workers during the renovation was estimated at $250,000.

5. Office furniture with water damage was replaced at a cost of $125,000.

6. The insurance recovery totaled $1,000,000.

7. A tornado has never touched down in Fairview or any neighboring states or communities.

Required

a. Discuss whether asset impairment has occurred. If so, which method should be used to measure impairment?

b. How should the city account for items related to the tornado damage?