Glossary

Impairment

Impairment is reducing the value of an asset in the accounts when its real worth falls below the figure on the books — a non-cash charge that still dents reported profit.

2 min read

Write-downAsset worth less than booked

Non-cashHits profit, not the bank

Definition

Impairment occurs when the carrying value of an asset — goodwill, equipment, an investment — exceeds the amount the business could recover from using or selling it. The difference is written off as an impairment charge.

In plain terms

It's an admission that something on the balance sheet isn't worth what it says. No cash leaves the business, but profit takes the hit.

Why it matters for your company

Impairments can dent the profit and net assets that lenders assess, even though cash is untouched. Context matters when you present accounts. See how to read a balance sheet.