Irreversible impairment refers to the irrecoverable decrease of the company's asset value after full evaluation, mainly including long-term deferred expenses, intangible assets and fixed assets.
1. Irreversible impairment of long-term prepaid expenses
1. Long-term prepaid expenses refer to the related expenses that need to be paid for the purchase or development of certain assets (such as software, patents, trademarks, etc.), which are usually gradually allocated to the enterprise cost in a certain period of time in the future.
2. If it is found that the value of these assets cannot be recovered, there will be irreversible impairment of long-term deferred expenses. This usually happens when the expected cash flow in the future is lower than the book value of the asset.
3. For example, when a company buys a new technology that keeps pouring into the market, but the technology has not been successful and there are no other potential customers, it is necessary to make irreversible impairment of long-term prepaid expenses.
2. Irreversible impairment of intangible assets
1. Intangible assets refer to intangible rights or assets, mainly including patent rights, goodwill and brand value. Such assets are often affected by factors such as industry, market and competition.
2. If the evaluation shows that the value of intangible rights is lower than its book value, irreversible impairment will occur. For example, in some industries, if the influence of a brand drops sharply, its book value will be higher than the market value, and then irreversible impairment is needed.
3. Irreversible impairment of fixed assets
1. Fixed assets refer to the fixed assets held by the company for a long time and used for production or service, such as buildings, machinery and equipment.
2. Due to changes in the economic environment and market competition, the value of fixed assets may be inconsistent with its book value in some cases. If, according to the evaluation results, the future profit of fixed assets can't make up for its book value, it will form irreversible impairment.
3. For example, an enterprise has purchased a large number of advanced production equipment, but the future benefit of the equipment is affected due to the extremely low production line, so it is necessary to make irreversible impairment on the fixed assets.