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MOHIT MAHAJAN

MOHIT MAHAJAN (Querist)
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10 July 2008 Can u plz. explain difference between ammortisation of assets and impairment of assets.

Rupert

Rupert (Expert)
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10 July 2008 Impariment of Asset is a permanent fall in the value of an asset. If the sum of all estimated future cash flows and market value is less than the carrying value of the asset, then the asset would be considered impaired and would have to be written down to its fair value.

Amortization, an accounting concept similar to depreciation, is the gradual reduction of the value of an asset or liability by some periodic amount (i.e., via installment payments). In the case of an asset, it involves expensing the item over the "life" of the item—the time period over which it can be used.

Amortisation or depreciation happens to an asset every year.