Impairment definition
/What is Impairment?
Impairment is a permanent decline in the value of an asset. This situation exists when the cash flows or other benefits generated by an asset decline, as determined through a periodic assessment process. Depending on the situation, an impairment can cause a major decline in the book value of a business. An example of an impairment is when a tornado blows the roof off a factory, with rain ruining the machinery installed there.
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Accounting for an Impairment
If there is impairment, then the difference between the fair value of the asset and its carrying amount is written off. This write-off occurs at once; the charge is not spread over multiple accounting periods.