Impaired Asset

Dictionary Says

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.
Investopedia Says

Investopedia explains '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.

Articles Of Interest

  1. Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  2. Impairment Charges: The Good, The Bad And The Ugly

    Impairment charge is a term for writing off worthless goodwill, but you need to know what its potential impact is on EPS.
  3. How To Analyze A Company's Financial Position

    Find out how to calculate important ratios and compare them to market value.
  4. Pay Attention To The Proxy Statement

    Don't overlook this overview of a company's well-being.
  5. Explaining Amortization In The Balance Sheet

    Amortization is important to account for intangible assets. Read to find out more about amortization.
  6. Understanding Off-Balance Sheet Financing

    For anyone who was invested in Enron, off-balance sheet (OBS) financing is a scary term. Off-balance sheet financing means a company does not include a liability on its balance sheet. It is ...
  7. Earnings Guidance: Can It Accurately Predict The Future?

    Explore the controversies surrounding companies commenting on their forward-looking expectations.
  8. Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".
  9. Financial Statement: Extraordinary Vs. Nonrecurring Items

    When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ...
  10. The Basics Of A Financial Analysis Report

    Running financial analysis on a company or industry is a key skill every investor must learn and understand how to undertake without which an ineffective financial report and investment recommendation ...
comments powered by Disqus
Marketplace
Hot Definitions
  1. Network Effect

    A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example...
  2. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  3. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  4. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  5. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  6. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
Trading Center