In accounting, the term for a permanent decline in the value of an asset is impairment.
An asset is impaired when its carrying amount on the balance sheet is higher than the amount the business expects to recover through continued use or sale. The difference is recognized as an impairment loss, reducing the asset’s book value.
Impairment is not the same as depreciation or amortization. Depreciation systematically allocates the cost of a tangible asset over its useful life, while amortization generally performs the same allocation for intangible assets. Impairment is an additional write-down caused by a sharp or lasting change, such as obsolescence, damage, falling demand, or a regulatory problem.
A write-off is a broader accounting action that removes an asset’s recognized value, sometimes because impairment has made it worthless. Thus, impairment describes the decline in value, while a write-off describes the accounting removal or reduction that may follow.