Impairment may occur as a result of an unusual or one-time event, such as a change in legal or economic conditions, a change in customer demand, or damage to an asset.
Assets should be regularly tested for impairment to ensure that their carrying value is not overstated.
Impairment occurs when the fair value of an asset is less than its carrying amount on the balance sheet.
If impairment is confirmed by testing, an impairment loss should be recognized.
An impairment loss reflects an expense in the current period that is recognized in the income statement and at the same time reduces the value of the impaired asset on the balance sheet.