Asset Impairment Charge

Category

Cash Flow

Units

Currency

US-GAAP elements

AssetImpairmentChargesImpairmentOfLongLivedAssetsHeldForUseGoodwillImpairmentLossImpairmentOfIntangibleAssetsExcludingGoodwill

Reference

ASC 360 (long-lived assets); ASC 350 (goodwill and intangible assets); ASC 230 (operating activities)

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

An asset impairment charge is a noncash expense a company records when the carrying amount of an asset on its balance sheet is no longer recoverable and must be written down, usually to fair value. On the cash flow statement it is added back to net income in the operating section, because the write-down reduced earnings without any cash leaving the company.

Impairments can apply to property and equipment, goodwill, other intangible assets, right-of-use lease assets, and investments. The cash was spent earlier, when the asset was bought or the business was acquired.

Different standards set the tests. Under ASC 360, a long-lived asset group that is held and used is first tested for recoverability by comparing its carrying amount with the undiscounted cash flows it is expected to generate; if it fails, the loss is the amount by which carrying value exceeds fair value. Under ASC 350, goodwill is tested at the reporting-unit level at least annually, and indefinite-lived intangibles are compared directly with fair value. Under US GAAP, impairment losses on assets held and used cannot be reversed later, even if values recover. In XBRL, companies use AssetImpairmentCharges for a combined figure or more specific elements such as ImpairmentOfLongLivedAssetsHeldForUse, GoodwillImpairmentLoss, and ImpairmentOfIntangibleAssetsExcludingGoodwill.

Presentation varies. Some companies show one impairment line on the cash flow statement; others split goodwill from other assets, or fold impairments into restructuring charges or other noncash items. The related income statement charge may sit in operating expenses or appear as its own line.

Analysts generally exclude impairments from measures of ongoing performance, which is one reason adjusted earnings often exceed GAAP figures. The charge still carries information: it signals that management's earlier investment, often an acquisition, is expected to earn less than planned. Recurring impairments suggest a pattern of overpaying for assets.