OUR THOUGHTS ON:

Indefinite-Lived Intangible Assets Impairment Testing

Business Advisors|Business Valuation

By Stephen Thimons

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 sthimons@schneiderdowns.com or 412-697-5281. 

© 2012 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

comments