Impaired asset accounting refers to the methods and practices used to record the reduced value of an asset due to declines in its market price or other factors that reduce its expected future benefit. This form of accounting is necessary because it ensures that businesses report their assets at values that are close to their true fair market values. By recognizing potential losses associated with these assets, businesses can make more conservative decisions about how much capital they need to fund their operations and activities. In essence, impaired asset accounting is an important tool to ensure business sustainability and profitability.