NEWS RELEASE 07/27/12
FASB Issues Accounting Standards Update to Simplify Testing of
Indefinite-Lived Intangible Assets For ImpairmentNorwalk, 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.
Update and high-level summaries of the Update—including a podcast and a “FASB in
Focus”— are available on the FASB website at www.fasb.org.