Impaired Asset

AAA

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 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.

RELATED TERMS
  1. Market Value

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

    An account that can be found in the assets portion of a company's ...
  3. Price-To-Book Ratio - P/B Ratio

    A ratio used to compare a stock's market value to its book value. ...
  4. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  5. Adversely Classified Asset

    A type of loan classification in which the loan or other asset ...
  6. Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another ...
Related Articles
  1. Using The Price-To-Book Ratio To Evaluate ...
    Forex Education

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

  2. Impairment Charges: The Good, The Bad ...
    Fundamental Analysis

    Impairment Charges: The Good, The Bad ...

  3. How To Analyze A Company's Financial ...
    Markets

    How To Analyze A Company's Financial ...

  4. Material Adverse Effect A Warning Sign ...
    Markets

    Material Adverse Effect A Warning Sign ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center