Which of the following is an external indicator of impairment?

The decline in market value serves as a clear external indicator of impairment because it signifies that the asset’s value in the marketplace has decreased, which could suggest that the asset is not performing as expected or that there are broader economic issues affecting its worth. This perspective aligns with the principles of asset impairment testing, where external factors like market conditions provide crucial information about an asset's recoverable amount.

In situations where the market value of an asset falls, it typically raises concerns that its carrying amount may no longer be recoverable, signaling a potential impairment. Such declines can occur due to various external factors, including changes in the economy, shifts in demand for the asset, or increased competition, all of which can adversely impact its fair value.

The other options, while relevant to the assessment of impairment, are typically regarded as internal indicators or related to the assessment of conditions associated with the asset rather than directly influenced by external market factors. Physical damage to the asset and obsolescence are internal considerations relating to the asset’s condition, whereas adverse changes in expected performance are often driven by internal operational factors rather than the market environment itself.