Fundamental Glossary / Earnings & Accounting Concepts
Impairment
A write-down of an asset when its recoverable amount falls below its book value.
Formula
Loss recognised in profit, and the asset's carrying amount reduced. Goodwill impairment is tested at least annually under Ind AS.
What it means
Impairment admits that an earlier asset value will not be recovered through use or sale. It is common after a failed acquisition, a plant that lost its market, or a receivable that will not be collected.
The charge is usually non-cash. The cash left when the asset was bought, or it will fail to arrive in the case of a receivable.
How to read it
A one-time impairment can clean the books. The question after it is whether the remaining assets are now honestly stated and whether the business that remains can earn its cost of capital.
What to watch
Avoiding impairment by optimistic forecasts is a known pressure point. A goodwill balance that never falls, in a business that clearly deteriorated, is not evidence that the goodwill is fine.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.