Impaired Asset

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What is an 'Impaired Asset'

An impaired asset is 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.

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.

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RELATED FAQS
  1. When and why does goodwill impairment occur?

    Understand what the goodwill of an asset is and how it's created. Learn how the goodwill of an asset can be impaired and ... Read Answer >>
  2. How is a goodwill impairment recorded on a company's financial statements?

    Learn about goodwill, how it's created and how it becomes impaired. Understand how goodwill impairment is recorded on a company's ... Read Answer >>
  3. How do businesses determine if an asset may be impaired?

    Find out how a business should determine if an asset may be impaired in accordance with the generally accepted accounting ... Read Answer >>
  4. How is impairment loss calculated?

    Learn how companies re-evaluate their assets and compare them against book values to recognize impairment and why this strategy ... Read Answer >>
  5. How do accountants record impaired assets?

    Learn why accountants need to identify and record impaired assets, how impairments are measured and how they impact financial ... Read Answer >>
  6. What are some ways a business owner can reduce unlimited liability?

    Understand how a fixed asset becomes impaired. Learn the accounting practices of impairing a fixed asset, and how it's recognized ... Read Answer >>
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