Impairment is a method of accounting for the loss in value of an Intangible Assets. If the value of an Intangible Asset listed on the Balance Sheet exceeds its ‘recoverable’ value, the asset is revalued on the Balance Sheet and an impairment loss is reported on the Income Statement.
Amortization is also used to reduce the value of the Intangible Asset over its expected useful life; this is similar to the Depreciation of Tangible Assets. If the market value is less than the balance sheet value after amortization, then an Impairment occurs.
The ‘recoverable’ value is the higher amount between 1) the value you can get from selling the asset or 2) the value you can get from using the asset.
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