Video: Impairment

In this lesson, Nick Palazzolo, CPA, unpacks the intricate concept of impairment and how it applies to various assets, using relatable examples such as the hypothetical devaluation of the Mickey Mouse brand or the crashing of a publicly traded stock. He crisply explains the need for businesses to recognize a permanent reduction in an asset's book value, bridging the gap between the theoretical aspects of impairment and its real-world implications. Focusing on investment securities, he walks through the processes by which they may be impaired, whether due to a plunge in market prices or the worsening financial condition of the entity in which one has invested. Nick makes the concept easily understood, detailing what triggers an impairment loss and how it affects both equity and debt securities on the balance sheet.