goodwill impairment

Definition

A write-down acknowledging that the premium paid in an acquisition was optimistic, to put it kindly. It's the accounting equivalent of admitting you dramatically overpaid for something because you got caught up in the moment.

Example Usage

The company announced a $15 billion goodwill impairment on last year's acquisition, finally admitting what everyone suspected all along.

Origin

IFRS and GAAP standards formalized in early 2000s after accounting scandals revealed companies were carrying worthless acquisition premiums indefinitely

Fun Fact

Companies must test goodwill for impairment annually, a process that mysteriously rarely finds problems until a new CEO arrives and wants to 'clean up the balance sheet.'

Source: Intangible asset accounting standards

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