The Financial Accounting Standards Board (“FASB”) recently released an exposure draft for a proposed Accounting Standards Update (“ASU”) related to Accounting Standards Codification (“ASC”) 350: Intangibles – Goodwill and Other.
The proposed update discusses the impairment testing for indefinite-lived intangible assets (other than goodwill). Some of the key provisions of the update include:
- An entity could first assess qualitative factors to determine whether it is more likely than not (defined as a greater than 50% likelihood) that an indefinite-lived intangible asset (other than goodwill) is impaired. If the qualitative test indicates no impairment, the quantitative test would not need to be performed.
- In performing the qualitative test, an entity would consider the effect relevant events and circumstances (including positive or mitigating effects) have on the fair value of the asset. Some of the events or circumstances outlined by FASB include (but are not limited to):
- Macroeconomic conditions;
- Industry and market considerations;
- Cost factors such as increases in materials, labor or other costs;
- Overall financial performance;
- Other relevant entity-specific events.
- An entity can bypass the qualitative assessment for any indefinite-lived intangible and perform the quantitative test instead.
- The amendment would be effective for impairment tests performed for fiscal years beginning after June 15, 2012, although early adoption would be permitted.
This proposed amendment would be consistent with the qualitative test allowed for goodwill under ASU 2011-08, an amendment to ASC 350. This proposed update would not change the impairment testing required for definite-lived assets.
If you have any questions on intangible asset impairment testing, contact Steve Thimons at firstname.lastname@example.org or 412-697-5281.
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