The loss in value that results from impairment. More specifically, it is the amount by which the carrying amount (book value) of an asset (or a cash generating unit, CGU) exceeds its recoverable amount. Impairment loss arises when the carrying amount drops below the amount that can be recovered from selling or disposing of the asset (which results in the removal of the asset from an entity’s balance sheet). By definition, recoverable amount is the higher of an asset’s fair value less costs of disposal (sometimes referred to as net selling price) and its value in use (VIU).

If found to be at an impairment loss (by conducting an impairment test), the asset will be recorded at its fair value (or value in use if higher than fair value). An impairment loss should be recognized in an amount equal to the difference between the carrying amount and the fair value. This difference is written off.