Goodwill Impairment

AAA

DEFINITION of 'Goodwill Impairment'

Goodwill that has become or is considered to be of lower value than at the time or purchase. From an accounting perspective, when the carrying value of the goodwill exceeds the fair value, then it is considered to be impaired. Negative publicity about a firm can create goodwill impairment, as can the reduction of brand-name recognition.

INVESTOPEDIA EXPLAINS 'Goodwill Impairment'

Goodwill impairment became a public issue during the accounting scandals in 2002. Many firms have artificially inflated their balance sheets by reported excessive goodwill value. This tactic can work during strong bull markets, but the accounting scandals led to legislation that required corporations to report their goodwill assets at realistic levels. Goodwill impairment tests must be conducted annually based on proper methodologies specified by accounting standards.

VIDEO

RELATED TERMS
  1. Goodwill

    An account that can be found in the assets portion of a company's ...
  2. Goodwill To Assets Ratio

    A ratio that measures how much goodwill a company is recording ...
  3. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  4. Negative Goodwill

    A gain occurring when the price paid for an acquisition is less ...
  5. Nonfinancial Asset

    An asset with a physical value such as real estate, equipment, ...
  6. Badwill

    The negative effect felt by a company when shareholders and the ...
Related Articles
  1. Goodwill
    Fundamental Analysis

    Goodwill

  2. Can You Count On Goodwill?
    Personal Finance

    Can You Count On Goodwill?

  3. Taking Stock Of Discounted Cash Flow
    Fundamental Analysis

    Taking Stock Of Discounted Cash Flow

  4. What are pro forma earnings?
    Investing

    What are pro forma earnings?

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center