18 Impairment
‘Today, we announced a fundamental restructuring of our phone business. As a result, the company will take an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services business.’
Satya Nadella, Microsoft CEO
In a nutshell
Impairment refers to a permanent loss in the income-generating potential of an asset.
A fixed asset is considered impaired when the worth to the business (known as ‘recoverable amount’) falls below its ‘carrying value’ in the balance sheet.
Fixed assets (tangible and intangible) with a finite useful economic life are assessed annually for evidence of impairment. An impairment test must be carried out when indicators of impairment exist. ...
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