Impaired Asset


DEFINITION of 'Impaired Asset'

A company's asset that is worth less on the market than the value listed on the company's balance sheet. This will result in a write-down of that same asset account to the stated market price.

Accounts that are likely to be written down are the company's goodwill, accounts receivable and long-term assets.


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BREAKING DOWN 'Impaired Asset'

If the sum of all estimated future cash flows is less than the carrying value of the asset, then the asset would be considered impaired and would have to be written down to its fair value. Once an asset is written down, it may only be written back up under very few circumstances.

Firm's carrying goodwill on their books are required to make tests of impairment annually. Any impairments found will then be expensed on the company's income statement.

  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  2. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  3. Goodwill

    An account that can be found in the assets portion of a company's ...
  4. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  5. Impaired Credit

    A deterioration in the creditworthiness of an individual or entity. ...
  6. Carrying Value

    An accounting measure of value, where the value of an asset or ...
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  1. How do you write off impaired assets from the financial statement?

    An accountant writes off an impaired asset by decreasing the book value of that asset on the company's balance sheet from ... Read Full Answer >>
  2. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  3. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  4. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  5. What are working capital costs?

    Working capital costs (WCC) refer to the costs of maintaining daily operations at an organization. These costs take into ... Read Full Answer >>
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    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>

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