Normally Goodwill remains constant on the Balance Sheet – why would it be impaired and what does Goodwill Impairment mean?

Usually, this happens when a company has been acquired and the acquirer re-assesses its intangible assets (such as customers, brand, and intellectual property) and finds that they are worth significantly less than they originally thought.

It often happens in acquisitions where the buyer “overpaid” for the seller and can result in a large net loss on the Income Statement (see: eBay/Skype).

It can also happen when a company discontinues part of its operations and must impair the associated goodwill.