What is the term for the reduction in the value of goodwill due to a decline in fair value?

The term for the reduction in the value of goodwill due to a decline in fair value is goodwill impairment.

Goodwill is an intangible asset created when one company acquires another for more than the fair value of its identifiable net assets. It represents expected benefits such as customer relationships, an assembled workforce, synergies, or a strong reputation. Because goodwill has no separately measurable physical asset behind it, accountants test whether its recorded value remains supportable.

If the relevant reporting unit or cash-generating unit is worth less than its carrying amount, the company recognizes an impairment loss and reduces the goodwill balance. The loss generally affects income but does not involve an immediate cash payment. A rise in goodwill's value normally is not recorded, because internally generated increases cannot be recognized as new goodwill.

A common mix-up is goodwill amortization. Under U.S. GAAP and IFRS, goodwill for most public companies is not systematically amortized; it is tested for impairment instead. U.S. private companies may elect a limited amortization alternative, making the distinction especially important.