Goodwill Impairment


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.


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BREAKING DOWN '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.

  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. Badwill

    The negative effect felt by a company when shareholders and the ...
  4. Intangible Asset

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

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

    An asset with a physical value such as real estate, equipment, ...
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  1. How is a goodwill impairment recorded on a company's financial statements?

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