This paper examines the effect of applying impairment criteria using the Children's Global Assessment Scale on rates, agreement between informants, and recall of diagnosis over 2 years in a sample of 220 offspring of depressed and nondepressed parents. The findings show that the offspring of depressed parents, compared with nondepressed parents, were more impaired overall. The rates of most psychiatric disorders in both groups of children were markedly reduced when impairment criteria were applied. The application of impairment criteria improved agreement between mother and child on many of the children's diagnoses and also improved stability of recall of child's diagnosis at 2-year follow-up. Long-term follow-up studies are needed to determine the clinical consequences for children who meet diagnostic criteria for psychiatric disorder but who have minimal functional impairment.