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What is impairment gain / losses, write-offs

Questions › Category: Financials Quadrant › What is impairment gain / losses, write-offs
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Yik hong Soo asked 2 years ago

Dear Admin, 
Do you mind to explain to me in detail, what actually is impairment gain / losses ? 
If we included this into the Net Profit, how does this impact us from reviewing a company ?
Thank you
Soo
 

2 Answers
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Jieren Zheng answered 2 years ago

During the annual audit, auditors will “test” the asset for impairment, which usually means reducing the value of the asset based what is reflected currently (such as previous cashflow projections against the current status).
Impairment is not a cash transaction like depreciation, so it might hide good earnings otherwise.

Victor Chng replied 2 years ago

Thanks JR

Jieren Zheng replied 2 years ago

Welcome!

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Victor Chng answered 2 years ago

Hi Yik Hong,

It is as what Jieren had mentioned.

To add on, impairment will affect the earnings but it is one off item so you have to add it back to reflect the real earning power of the company.