Intangible assets that are definite lived and subject to amortization are tested for impairment by examining recoverability. If the undiscounted cash flows of the asset are less than its carrying value, it is considered not recoverable and impairment is determined based on its fair value.
Delphi can assist with the testing and fair value of long lived intangible assets including:
- Customer relationships
When a company makes an acquisition, it may be necessary to have the various assets appraised as a basis for allocating the total acquisition cost among the individual assets (i.e., real estate, machinery and equipment, inventory, and intangible assets such as non-compete agreements, patents, trademarks, etc.). If a company has recorded goodwill on its balance sheet, it may be necessary to test it for impairment on an annual basis. A valuation of the reporting unit and its individual intangible assets may be required as part of this impairment test. These are requirements set forth by the Financial Accounting Standards Board (“FASB”) for a company with financial statements prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), which has made a recent acquisition (Accounting Standards Codification (“ASC”) Topic 805) or has goodwill on its balance sheet (ASC Topic 350). However, with recent developments given PCC Issues 13-01A and 13-01B, it is important to check with your CPA regarding your particular requirements.