Earlier today, the FASB issued a proposal for impairment of indefinite-lived intangible assets (other than goodwill). The proposal simplifies impairment testing for these assets by allowing entities to first assess qualitative factors in determining whether the fair value of the asset is less than the carrying amount.
The Finance and Accounting practice at Resources Global Professionals has issued the following Financial Alert to help organizations get a handle on the proposed changes. If you have questions or if you need assistance, contact us and we’ll put you in touch with your local Resources office. At Resources, we provide strong technical accounting, project management, internal controls and information systems expertise and can help businesses with all aspects of financial reporting, including assessing the impact of this proposed accounting standards update on your business.
FASB ISSUES PROPOSAL FOR IMPAIRMENT OF INDEFINITE-LIVED INTANGIBLE ASSETS (SUBTOPIC 350-30: INTANGIBLES-GOODWILL AND OTHER-GENERAL INTANGIBLES OTHER THAN GOODWILL)
January 25, 2012, the Financial Accounting Standards Board (FASB) proposed changes to simplify current guidance for testing indefinite-lived intangible assets other than goodwill for impairment.
Background
In September 2011, the FASB issued ASU 2011-08 (Intangibles – Goodwill and other: testing for goodwill impairment) which simplified guidance for impairment testing of Goodwill. During the outreach process of developing the final standard, the FASB received input from many participants in regards to the recurring costs and complexity of performing impairment tests for indefinite-lived intangible assets other than goodwill.
Current impairment guidance for these types of assets requires that impairment testing take place at least annually, by comparing the fair value of the asset with its carrying amount. If the carrying amount exceeds the fair value, then an impairment loss is recognized.
Proposed changes
The Amendment proposes that an entity would have the option of first assessing the qualitative factors to determine whether it is more likely than not (presumed to be 50% or more likelihood) that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If, after consideration of qualitative factors, an entity determines that it is not more likely than not that the fair value of the asset is less than its carrying amount then the organization would not be required to take any further action. If the conclusion is the opposite, then the entity would be required to perform impairment testing of the indefinite-lived asset.
In addition, an entity may choose to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to calculate its fair value.
The amendments will not change how to measure an impairment loss and therefore, it is not expected to affect the information reported to users of financial statements.
Comments on the Exposure Draft are open until April 24, 2010.
Proposed effective date
The proposed amendments would be effective for annual and interim impairment tests performed for fiscal years beginning after June 15, 2012 with early adoption permitted.
