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The Finance Book by Si Hussain, Stuart Warner

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18 Impairment

‘Chevron has reported impairment charges of almost $5bn in the past two years.’

Gillian Tett, US managing editor and columnist, Financial Times

In a nutshell

Impairment refers to a permanent loss in the income-generating potential of an asset.

A fixed asset is considered impaired when its worth to the business (known as ‘recoverable’ value) falls below its ‘carrying’ value (also known as ‘book’ value).

Tangible fixed assets are assessed for indications of impairment annually to ensure they are not overvalued in the balance sheet. Where there are indications of impairment, the recoverable amount is calculated and the impairment loss (if any) is reflected in the profit and loss account.

Indefinite life assets such as goodwill ...

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