Whenever froth gets blown off the top of the market and the reality of lower asset values begins to sink in, certain balance sheet items have a tendency to evaporate. Chief among these is goodwill.

When it comes to writedowns of this accounting item -- which simply represents the excess paid over book value for an acquisition -- we've already seen some doozies in this downturn. Royal Bank of Scotland (NYSE:RBS), for instance, is taking a giant impairment charge on its ABN Amro deal (which management termed a "bad mistake" during a public dressing-down in front of British Parliament). Another example would be News Corp.'s (NYSE:NWS) multibillion-dollar writedown of its Dow Jones-related goodwill.

When you take a charge so large that it equals a multiple of your entire market capitalization, you're really in a league of your own. Such is the situation with beleaguered contract driller Hercules Offshore (NASDAQ:HERO), which is doing less drilling by the day.

Hercules has now cold-stacked three submersibles, five Gulf of Mexico jackups, and 10 inland barges. Cold stacked doesn't necessarily mean "ain't comin' back," but the vessels are not being actively marketed. At year's end, the company conducted an impairment test and decided to err on the conservative side, which I certainly applaud. The result is pretty wretched, though. The entire $950 million of goodwill (largely related to the TODCO acquisition) is gone, and Hercules also wrote down $377 million worth of long-lived assets to something approximating scrap value.

These are staggering sums, but I'm frankly not that surprised. We noted the stark differences between Hercules' shallow-water drilling assets and those of Noble (NYSE:NE) and Ensco (NYSE:ESV) in late July. These are rinky-dink rigs, plain and simple. While I hardly envisioned the extent of the ensuing energy crash, I hope I saved at least one Hercules investor from the past six months' pain.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Hercules Offshore is a Motley Fool Hidden Gems recommendation. The Motley Fool has a disclosure policy.