Impairment is the accounting recognition that an asset's carrying value exceeds its recoverable amount — the higher of fair value less costs to sell and value in use. Under IAS 36, impairment testing is mandatory annually for goodwill and indefinite-life intangibles, and whenever triggering indicators exist for other assets. An impairment charge reduces the carrying value to the recoverable amount and is recognised immediately in the income statement. In financial due diligence, past impairment charges are analysed as signals of strategic underperformance and must be assessed for potential reversal or further deterioration post-acquisition.

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Example: a Swiss industrial group records a CHF 2.8 million goodwill impairment on its German subsidiary, reducing the CGU's carrying value from CHF 6.5 million to CHF 3.7 million. The impairment test uses a WACC of 10.5% and terminal growth of 1.5%, revealing that the subsidiary's recoverable amount (CHF 3.7 million) falls below its carrying value. This signal triggers a strategic review of the subsidiary's viability as an acquisition target.

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Hectelion conducts impairment testing and CGU valuations for IFRS reporting purposes, providing defensible recoverable amount calculations reviewed by auditors.