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Impairment Loss

Accounting

An impairment loss is the amount recognized when an asset's carrying amount exceeds its recoverable amount.

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An impairment loss is the amount of value reduction recognized when an asset’s carrying amount exceeds its recoverable amount.

It is the recorded loss created by Impairment, and it usually lowers both the asset balance and current-period earnings.

Formula

$$ \text{Impairment Loss} = \text{Carrying Amount} - \text{Recoverable Amount} $$

This applies only when carrying amount is higher than recoverable amount.

Example

If machinery has a carrying amount of $70,000 but recoverable amount of $50,000, the impairment loss is $20,000.

$$ \$70{,}000 - \$50{,}000 = \$20{,}000 $$

Where It Shows Up

An impairment loss typically:

  • reduces the carrying amount of the asset
  • appears as an expense or loss in the period recognized
  • lowers profit and often equity

Depending on the asset and accounting framework, later reversal may or may not be permitted.

FAQs

What is an impairment loss?

It is the accounting loss recorded when an asset is worth less on a recoverable basis than its carrying amount on the books.

Is an impairment loss the same as impairment?

Not exactly. Impairment is the condition; impairment loss is the recorded amount of the reduction.

Does an impairment loss reduce net income?

Yes. It normally reduces profit in the period it is recognized.
Revised on Monday, May 18, 2026
Impairment