An impaired asset is a condition in which an asset's market value falls below its carrying amount and is not expected to recover. This means that an asset's market valuation is less than the book value

Book value

In accounting, book value or carrying value is the value of an asset according to its balance sheet account balance. For assets, the value is based on the original cost of the asset less any depreciation, amortization or Impairment costs made against the asset. Traditionally, a company's book value...

 of the asset and the future cash flows to be generated from the asset are less than the net difference of the market value and the book value of the asset. At this point it becomes necessary to write down the value of the asset in the books by debiting a loss account (which will show up as an expense in the income statement) and crediting the respective asset account. This is a common occurrence for goodwill

Goodwill (accounting)

Goodwill is an accounting concept meaning the value of an entity over and above the value of its assets. The term was originally used in accounting to express the intangible but quantifiable "prudent value" of an ongoing business beyond its assets, resulting perhaps because the reputation the firm...

where a company will purchase another company for more than the value of the net assets of the target company. Under US GAAP, goodwill is tested annually for impairment.