Preface

Under ASC 350-20, an entity recognizes a goodwill impairment loss when the carrying amount of a reporting unit that includes goodwill exceeds its fair value; the loss is limited to the amount of goodwill allocated to the reporting unit. While entities have been required to test goodwill for impairment for many years, the current goodwill accounting model has evolved significantly from the model that the FASB originally introduced in 2001. The FASB has issued numerous Accounting Standards Updates (ASUs) on this topic, which were generally intended to simplify or reduce the cost and complexity of performing goodwill impairment testing. However, despite the FASB’s simplification efforts, entities continue to need to use significant judgment in accounting for goodwill.

Under ASC 350-30, an entity must estimate the useful life of an intangible asset, which may be finite or indefinite. An intangible asset that is finite-lived is subject to amortization over its useful life to the entity and is subject to impairment testing in accordance with ASC 360-10. By contrast, an intangible asset that is indefinite-lived is not subject to amortization and is subject to impairment testing in accordance with ASC 350-30, which requires that the entity compare the fair value of the intangible asset with its carrying amount and recognize an impairment loss for any excess.

Note that this Roadmap is not a substitute for the exercise of professional judgment, which is often essential to applying the requirements of ASC 350-20 and ASC 350-30. It is also not a substitute for consulting with Deloitte professionals on complex accounting questions and transactions.

We hope that you find this publication a valuable resource when considering the accounting for goodwill and intangible assets.