Asset Impairment Accounting is the accounting process that recognizes the diminishment of an asset’s value due to usage, technological developments, obsolescence, or physical deterioration. When assets no longer produce the same income as before, their recorded values must be adjusted to reflect their current market value. This adjustment is called impairment, and it is usually completed with a balance sheet restatement. The principle of impaired asset accounting is simple: if the asset cannot generate the same value as before, it should be reported at its lower value to prevent overstating earnings.