Companies applying U.S. GAAP may need to test goodwill for impairment under ASC 350 annually and when events or changes in circumstances indicate that impairment may have occurred. Under the standard one-step model, the analysis compares the fair value of a reporting unit with its carrying amount, including goodwill. If carrying amount exceeds fair value, an impairment loss is recognized subject to applicable limits, including the cap at the carrying amount of goodwill.

The applicable approach depends on the reporting entity’s accounting policies. Certain private companies and not-for-profit entities may elect an alternative accounting method for goodwill, which changes the timing and requirements for impairment testing. We work with management and its auditors to understand the applicable framework and define the valuation work needed.

Goodwill Impairment Valuation Support

• Fair-value analyses of reporting units for goodwill impairment testing
• Assessment of financial forecasts, market evidence, company-specific risks and relevant valuation assumptions
• Reconciliation of income and market evidence, where appropriate to the assignment
• Valuation of intangible assets when a related impairment analysis requires a fair-value measurement
• Clear reports documenting methods, key inputs, assumptions and conclusions

We coordinate with management and the audit team to understand the reporting purpose, valuation date, reporting unit and information available. Our analyses are tailored to the facts of the business and the applicable accounting framework, and are prepared to support the company’s financial-reporting process.

Mark Shifrin, ASA, has focused on business valuation since 2007 and brings more than 25 years of valuation experience. For goodwill or intangible-asset valuation support, contact Brookline Valuation Services through our contact page, call 617-308-0450 or email mshifrin@brooklinevaluation.com.