What is Impairment Charge?
Impairment Charge is an expense that reflects a reduction in the carrying value of an asset on the Balance Sheet. The impairment occurs when the carrying value of a particular asset on the Balance Sheet exceeds its fair market value. While any asset can suffer impairment, the most commonly impaired assets are inventory, PP&E, intangible assets and goodwill.
In this video you say when the carrying value is greater than the fair market value, then nothing is done. However; in your example you show that the carrying value of $90 being higher than the fair market value of $70 must be revised down $20 and this is the impairment charge. What am I missing?
Hi Stephen,
Thanks very much for asking this question. It looks like we mixed up “higher” and “lower”. We’ve since corrected the graphic visual and the caption. We’ll correct the audio later down the road, but have uploaded this revised video lesson for now. Thanks again for pointing this out. If you see other issues, please don’t hesitate to let us know.
Best,
Lumovest Support
Thank you!
I was afraid I was misinterpreting.