How Do You Spell IMPAIRMENT CHARGE?

Pronunciation: [ɪmpˈe͡əmənt t͡ʃˈɑːd͡ʒ] (IPA)

The word "impairment charge" is spelled using the International Phonetic Alphabet (IPA) as ɪmˈpɛəmənt tʃɑːdʒ. The first syllable is pronounced with a short "i" sound, like in the word "impossible", followed by a short "e" sound as in the word "bed". The second syllable is pronounced with a long "a" sound, like in the word "airplane", followed by the stress on the "ment" portion. The second word, "charge", is pronounced with a "ch" sound followed by a long "a" vowel and a soft "j" sound.

IMPAIRMENT CHARGE Meaning and Definition

1. Impairment charge refers to an accounting term used to describe the reduction in the value of an asset when the carrying amount exceeds the recoverable amount. It is a non-cash expense that is recorded by a company when the value of an asset declines due to various factors. These factors can include changes in market conditions, obsolescence, technological advancements, or a significant decrease in the asset's usefulness or profitability.

   When an impairment charge is recognized, the company must adjust the carrying amount of the asset on its balance sheet to reflect its new fair value. This process involves comparing the asset's carrying value to its recoverable amount, which is the higher of either its fair value less costs to sell or its value in use. The impairment charge is then calculated as the difference between these two values.

   Impairment charges can have a significant impact on a company's financial statements, as they reduce the reported net income and total assets. They are commonly recorded for long-term assets such as property, plant, and equipment, intangible assets, or investments. The purpose of recognizing impairment charges is to ensure that the carrying value of assets on a company's balance sheet accurately reflects their true economic worth. By doing so, it provides stakeholders with a more realistic view of the company's financial position and profitability.

Etymology of IMPAIRMENT CHARGE

The term "impairment charge" originates from the combination of the words "impairment" and "charge".

1. Impairment: The word "impairment" stems from the Old French word "empairer", derived from the Latin word "imparare", meaning "to make worse" or "to weaken". In accounting and finance, impairment refers to a reduction in the value of an asset or entity due to various factors such as damage, obsolescence, or inability to generate expected future cash flows.

2. Charge: The term "charge" comes from the Old French word "chargier", ultimately derived from the Latin word "carricare", meaning "to load" or "to burden". In accounting, a charge typically refers to an expense, liability, or reduction in value recorded in financial statements.