(16)	ASSET IMPAIRMENTS

Management estimates the fair value of each vessel not expected to return to active service (considered Level 3, as defined by ASC 820, Fair Value Measurements and Disclosures) by considering items such as the vessel’s age, length of time stacked, likelihood of a return to active service, actual recent sales of similar vessels, among others. For vessels with more significant carrying values, we obtain an estimate of the fair value of the stacked vessel from third-party appraisers or brokers for use in our determination of fair value estimates.

Due in part to the modernization of the company’s fleet more vessels that are being stacked are newer vessels that are expected to return to active service. Stacked vessels expected to return to active service are generally newer vessels, have similar capabilities and likelihood of future active service as other currently operating vessels, are generally current with classification societies in regards to their regulatory certification status, and are being actively marketed. Stacked vessels expected to return to service are evaluated for impairment as part of their assigned active asset group and not individually.

The company reviews the vessels in its active fleet for impairment whenever events occur or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. In such evaluation, the estimated future undiscounted cash flows generated by an asset group are compared with the carrying amount of the asset group to determine if a write-down may be required. If an asset group fails the undiscounted cash flow test, the company estimates the fair value of each asset group and compares such estimated fair value, considered Level 3, as defined by ASC 820, Fair Value Measurements and Disclosures, to the carrying value of each asset group in order to determine if impairment exists. Similar to stacked vessels, management obtains estimates of the fair values of the active vessels from third party appraisers or brokers for use in determining fair value estimates.

During the first quarter of fiscal 2018, the company recognized $136.9 million of impairment charges on 72 vessels that were stacked. The fair value of vessels in the stacked fleet incurring impairment during the first quarter of fiscal 2018 was $504.2 million (after having recorded impairment charges). Excluding leased vessels, a total of 32 vessels in the stacked fleet, representing $190.3 million of net book value at June 30, 2017, were not impaired during the first quarter of fiscal 2018.

During fiscal 2018 the company recognized $26.5 million of impairments on five vessels in the active fleet. The fair value of vessels in the active fleet incurring impairment during the first quarter of fiscal 2018 was $63.8 million (after having recorded impairment charges). Excluding leased vessels, a total of 133 vessels in the active fleet, representing $1.8 billion of net book value at June 30, 2017, were not impaired during the first quarter of fiscal 2018.

The below table summarizes the combined fair value of the assets that incurred impairments during the quarters ended June 30, 2017 and 2016, along with the amount of impairment.

	Quarter Ended
	June 30,
(In thousands)	2017		2016
Number of vessels impaired in the period		77		19
Amount of impairment incurred	$	163,423	$	36,886
Combined fair value of assets incurring impairment		567,975		155,400