Impairment Testing for Goodwill (ASC 350)

Under ASC 350, goodwill and other indefinite lived identified intangibles must be tested for impairment at least annually and more often if circumstances indicate risk of impairment. However, with recent developments given PCC Issues 13-01A and 13-01B, it is important to check with your CPA regarding your particular requirements.

A qualitative assessment (Step 0) may be performed to determine if it is more likely than not that goodwill is impaired. Alternatively, a company can jump to Step 1 and perform a quantitative assessment to determine if the fair value of a reporting unit is less than its book value.

If Step 1 indicates that impairment to goodwill exists, further analysis is required to measure the amount of impairment. This analysis (Step 2) is similar to ASC 805 analysis, as the implied value of goodwill is determined once value is allocated to all assets.

Indefinite lived intangibles, other than goodwill, are also tested by comparing their fair value to the carrying value.

Delphi is experienced in advising clients when a qualitative assessment (Step 0) may be the appropriate channel, and in performing impairment tests (Step 1) and measurements (Step 2).