Difference Between Bad Debt And Impairment
Bad Debt is the actual expense or loss to the business which was due from customers who failed to pay the company because of insolvency or who are declared as bankrupt by the
court while Impairment means a constant or permanent decrease in the fair market value of Fixed Assets / Non Current Assets due to its usage or physical damages, etc. and it results a impairment loss recognized in the
Income Statement as the carrying value or book value of a fixed asset exceeds its recoverable amount which is a benefit obtained from the use or sale of that particular Asset.
Depreciation is calculated by different Depreciation Methods such as Straight-Line-Method, Written Down Value Method, etc., while Impairment is calculated by either Loss Incurred
Model or Forward-Looking ECL Model and its formula to calculate is given below:
Comments