Are asset impairments really that bad a kick in the guts? Just ask these 4 ASX stocks which recently recorded them!

You may have heard companies announce an impairment of particular assets. This is typically perceived by investors as bad news, if nothing else because it will be a big hit to the company’s profits. But is it as bad as the reaction would suggest?

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What is an impairment?

Companies impair assets when the carrying value of those assets on the company’s balance sheet is greater than the recovery value (the fair market value of such assets). This situation can occur due to a variety of reasons, such as economic downturns, changes in technology, changing consumer tastes and preferences, new laws or regulations, or other external factors.

Companies must assess their assets regularly and compare the carrying value with the fair market value to determine if an impairment exists. If an impairment is found then it must be recorded to accurately reflect the financial position of the company. Of course, there are accounting standards that govern when impairments happen and the extent to which they may happen.

Once it is done – it is done

It is important to note that accounting law requires the impairment to be permanent – in other words it cannot be reversed. By recording impairments, companies are able to report accurate and reliable information about their financial condition. For ASX companies this will commonly be an acquisition that has not done as well as anticipated and will result in the impairment of goodwill.

It is not depreciation or a write-off

Impairments must be distinguished from write-offs or depreciation. A write-off occurs when the assets is unusable – for instance, if a motor vehicle is involved in a major crash that makes it unusable.

A depreciation is a reduction in the value of the asset, but it is expected reduction that occurs in the ordinary course of business (i.e. wear and tear). An impairment occurs unexpectedly and occurs when the gap between the carrying value of the assets and the market value is significant. An asset’s market value would inevitably account for depreciation but not for the impairment.

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4 Recent examples

What is the point of knowing all this? Because when companies announce impairments, they impact a company’s profit and shares commonly sell off. Let’s look at a few recent examples.

1. IGO

In 2023, only a year after it bought nickel miner Western Areas, IGO had to record an impairment charge of A$880-980m – not a write off of the full amount but a huge amount, not just in its own right but of the amount it paid.

The impairment reflected higher capital and operating costs than initially forecast, production schedule challenges, and delays in development at Cosmos. The impairment came right as previous production guidance for Cosmos was withdrawn, and all the troubles can be put down to nickel prices being in the doldrums. IGO would go on to impair another $275-295m of other exploration assets in the very next year. Although this is an easy example, we will concede it is not the best one to use as an illustration of how much a share price can fall because it was due to lower nickel prices.

2. BlueScope Steel (ASX:BSL)

BSL recorded a non-cash impairment charge of approximately A$438.9m in its FY2025 financial results. This was recognised in relation to the BlueScope Coated Products (BCP) cash-generating unit in North America which had only been bought 3 years earlier. $362m of the impairment was goodwill and the balance was customer relationship intangibles.

The reason was underperformance relative to expectations — lower sales volumes, weaker demand, and operational inefficiencies meant future cash flow projections were reduced. Integration challenges and slower ramp-up of planned products also weighed on value, delaying expectations of benefit from the acquisition. The impairment was a key factor in BSL’s full-year profit falling by 90% even thought EBIT and cash flows were positive.

3. Pexa (ASX:PXA)

This one was not as major, but we note it to show that big tech companies can record impairments too. In early CY25, Pexa told investors it’d recognise a $35-40m impairment in its results. This was form a minority investment it held.

As an e-conveyancer, PXA’s business is tied to property settlement volumes and related digital service revenues. Slower transactional activity, uncertain settlement throughput, and de-recognition of some deferred tax assets (due to accounting criteria not being met) meant that certain carry values couldn’t be supported under IFRS/AASB tests.

4. Myer (ASX:MYR)

Myer posted a significant one-off non-cash impairment of A$213.3 million in its FY25 statutory net results, linked to goodwill on the Apparel Brands acquisition. Again this was not long after it was acquired. Keep in mind that acquisition accounting requires fair value and this is typically the share price.

Because Myer’s share price rose between announcement and completion, the fair value of the consideration increased — but the underlying retail performance didn’t scale accordingly by the reporting date. This disconnect warranted the goodwill impairment to align recorded asset value with realistic future cash flows. Myer, which ended up with a $211.2m net loss just because of this emphasised that integrating the brands remains part of its strategy, but macro headwinds in retail and cost pressures contributed to the decision to impair.

But it is not a cash outflow

No, it does not result in the amount of cash going out of the company. So you won’t see it impact the company’s EBITDA or EBIT, but it will impact the NPAT and EPS because non-cash items such as impairments and depreciation represent a cost to the company in a reduction in the value of assets.

Arguably, shareholders don’t like impairments not just because of the profit hits, but inevitably because this will be a change of course from what a company will have been saying about the relevant assets for some years. In many companies’ cases, it may have those assets for several years! So, if you’re wondering why impairments are such a big deal in the eyes of other investors, now you know.