Impaired Asset

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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.

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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