What is impairment of assets with examples?

An impairment loss occurs when the carrying amount of an asset is greater than its recoverable amount. … For example, assume an asset is expected to create $10,000 cash income per year for the next three years at a discount rate of 2%, so its value in use is $28,839 in the current year.

What can be impaired?

Assets most likely to become impaired include accounts receivable and long-term assets. A loss due to an asset impairment is recorded on both the balance sheet and the income statement.

How do you explain impairment?

Impairment is most commonly used to describe a drastic reduction in the recoverable value of a fixed asset. The impairment may be caused by a change in the company’s legal or economic circumstances or by a casualty loss from an unforeseeable disaster.

What is goodwill impairment example?

Example of a Goodwill Impairment

Company BB acquires the assets of company CC for $15M, valuing its assets at $10M and recognizing goodwill of $5M on its balance sheet. After a year, company BB tests its assets for impairment and finds out that company CC’s revenue has been declining significantly.

What is an impaired employee?

Employers must handle employees who have substance abuse or addiction issues carefully, but decisively, as impaired employees create huge risks for employers. … For example, under the Americans with Disabilities Act (“ADA”), a recovered alcoholic or medicine addict may be considered to have a disability that is protected.