Definition: Impairment is a downward revaluation, a write-down in accounting.
This is needed when an asset's market value falls below its carrying amount and is not expected to recover any time soon.
In other words it is the accouning treatment for the situation in which an asset's market value is less than its book value and the future cash flows resulting from the asset are less than the net difference between the market value and the book value.
This is a common occurrence for goodwill, for example when a company purchases another firm.
More on accounting and auditing: Accounting Cycle, Accounts Payable, Accounts Receivable, Accrued Revenue, Amortization, more on accounting and auditing...
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