FASB Issues Accounting Standards Update to Simplify Testing of Indefinite-Lived Intangible Assets For Impairment

Norwalk, CT, July 27, 2012—The Financial Accounting Standards Board (FASB) today issued Accounting Standards Update No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The Update simplifies the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill. Examples of intangible assets subject to the guidance include indefinite-lived trademarks, licenses, and distribution rights. The standard applies to all public, private, and not-for-profit organizations.

The amendments allow an organization the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. An organization electing to perform a qualitative assessment is no longer required to calculate the fair value of an indefinite-lived intangible asset unless the organization determines, based on a qualitative assessment, that it is “more likely than not” that the asset is impaired.

Under former guidance (FASB Accounting Standards Codification®, Subtopic 350-30, Intangibles—Goodwill and Other—General Intangibles Other than Goodwill), an organization was required to test an indefinite-lived intangible asset for impairment on at least an annual basis by comparing the fair value of the asset with its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeded its fair value, an impairment loss was recognized in an amount equal to the difference.

“The Board expects that the revised guidance will reduce the cost of accounting for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low,” said FASB Chairman Leslie F. Seidman.

The amendments in this Update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted.

The Update and high-level summaries of the Update—including a podcast and a “FASB in Focus”— are available on the FASB website at