[brvsft]

It's not really a circular definition because "impairment" and "goodwill" are two words with their own meanings in accounting/finance, so "goodwill impairment" including those two words separately in the definition isn't circular.

Goodwill is basically the extra value paid one company pays when buying another company. So if Etsy buys Depop for 1.6B, and of that 1.6B, let's say 600M were actual 'assets' (cash, inventory, whatever (not that Depop had those things when purchased)), then Etsy paid $1B (1.6B - 600M) in "goodwill" for Depop. That "goodwill" is basically the Depop brand, the desire for existing and potential customers to use Depop, etc.

Suppose Etsy wakes up one day and realizes that the $1B worth of Depop brand must be worth less. I don't know how they determine this, as the most realistic way would be if they were somehow shopping around to sell Depop off to another buyer, and all the offers are markedly lower than the $1.6B they paid for the same assets + intangibles. That difference is the impairment, to the goodwill.

Not sure if that made it sound less circular. I'm also not an accountant, but I've tried learning quite a bit about the subject.

[drbacon]

Thank you for that very well-stated explanation! TIL!