Impairment Losses

Impairment losses occur when an asset’s value on a company’s balance sheet decreases significantly and permanently, meaning the asset is now worth less than its recorded value. This can happen due to market changes, obsolescence, or damage. When identified, the company must recognize an impairment loss, reducing the asset’s value on its financial statements to reflect its current worth. This ensures the company’s financial reports accurately represent its assets and financial health. Essentially, impairment losses are adjustments made to account for assets that no longer hold the value previously recorded.