Accounting for Goodwill and Other Intangible Assets

CHAPTER 4Impairment Testing for Goodwill and Other Intangible Assets

A. Overview of the Impairment Testing Rules

An entity must test goodwill and intangible assets to determine if they have become impaired, following this schedule:

As Exhibit 4.1 shows, impairment testing is not the same for all intangible assets. Goodwill has its own type of impairment test, found in ASC 350-20.¹

EXHIBIT 4.1 Impairment Tests for Goodwill and Other Intangible Assets

Goodwill	Other Intangible Assets
Finite Lives	Indefinite Lives
Not Amortized	Amortized	Not Amortized
Impairment Test ASC 350-20-35	Impairment Test ASC 360-10-35	Impairment Test ASC 350-30-35
Qualitative or One-Step Test Performed Annually or When Events and Circumstances Indicate that Fair Value of a Reporting Unit Is Less Than Its Carrying Amount	When Events and Changes in Circumstances Indicate the Asset's Carrying Value May Not Be Recoverable	Qualitative or One-Step Test Performed Annually or When Events and Changes in Circumstances Indicate the Asset May Be Impaired

Other intangible assets with finite lives are tested under the Impairment or Disposal of Long-Lived Assets subsections of ASC 360-10.² Testing an intangible asset with a finite life for impairment is required only when events or changes in circumstances indicate the carrying amount of the intangible asset may not be recoverable.³ If no indication ...