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. Impaired Credit

    A deterioration in the creditworthiness of an individual or entity. ...
  5. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
  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 negative?

    Working capital can be negative if a company's current assets are less than its current liabilities. Working capital is calculated ... Read Full Answer >>
  3. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  4. Does working capital include prepaid expenses?

    The calculation for working capital includes any prepaid expenses that are due within one year, since such prepaid expenses ... Read Full Answer >>
  5. Does working capital include short-term debt?

    Short-term debt is considered part of a company's current liabilities and is included in the calculation of working capital. ... Read Full Answer >>
  6. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>

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