Describe the concept of 'impairment'.

The concept of 'impairment' refers specifically to a situation where the carrying amount of a fixed asset exceeds its recoverable amount. This typically occurs when there are indications that an asset has lost value due to factors like market conditions, physical damage, or obsolescence. When an asset is deemed impaired, a company must recognize this loss in value and adjust the asset's recorded value on the balance sheet to reflect its recoverable amount, which is the higher of fair value less costs of disposal and value in use.

This is crucial for providing accurate financial statements, as it ensures that assets are not overstated on the balance sheet and that the financial position of the company is presented fairly. Recognizing impairment helps stakeholders make informed decisions based on the true economic condition of the company's assets.

In contrast, an increase in asset value would suggest that the asset's useful life or efficiency has improved, which does not align with the notion of impairment. A short-term liability relates to obligations that a company needs to settle within a year and does not connect to asset valuation. Lastly, while impairment may involve reductions in value akin to depreciation, it is not a form of depreciation itself; the two concepts serve different accounting purposes and calculations.