Impaired goodwill refers to the reduction in the carrying value of goodwill on a company's balance sheet when it is determined that the goodwill has lost value, typically due to a decline in the expected future cash flows from the acquired business. This impairment is recognized as a loss on the income statement and affects a company's overall financial health. Goodwill impairment testing involves assessing whether the fair value of a reporting unit is less than its carrying amount, which includes goodwill.
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