Impairments and write-downs in EBIT
Impairment charges reduce GAAP operating income and therefore GAAP EBIT. They are usually added back in Adjusted EBIT because they are non-cash and one-off in nature. Goodwill impairment is governed by FASB ASC 350-20[ASC 350-20].
Types of impairment
- Goodwill: tested annually under ASC 350-20. Non-cash.
- Indefinite-lived intangibles: trademarks, broadcast licences. Non-cash.
- Finite-lived intangibles: customer lists, technology. Non-cash.
- Inventory write-downs: lower-of-cost-or-NRV under ASC 330. Cash in the sense that the inventory cash outlay is sunk.
- PP&E impairment: ASC 360. Non-cash in the period of recognition.
Where they sit on the income statement
- Goodwill impairment: usually a separately labelled line in operating expenses.
- Asset write-downs: inside cost of revenue, SG&A, or a separate "Other charges" line.
- Inventory write-downs: inside cost of revenue.
Adjusted EBIT treatment
Goodwill and intangible impairments are routinely added back because they are non-cash and reflect prior-period acquisition accounting rather than current operating performance. Inventory write-downs are usually kept in (the cash outlay was real and the impairment reflects a current-period operating problem).
See Adjusted EBIT page and Tesla FY25.