In response to concerns regarding the cost and complexity of testing indefinite-lived intangible assets (other than goodwill) for impairment, as currently required under Accounting Standards Codification (ASC) Topic 350, Intangibles – Goodwill and Other , the Financial Accounting Standards Board (FASB) recently issued a Proposed Accounting Standards Update (PASU). The objective of this PASU is to simplify how an entity is required to test indefinite-lived intangible assets for impairment.
The PASU introduces a qualitative approach for testing these assets for impairment whereby an entity would be allowed to first determine whether it was more likely than not (or a likelihood of greater than 50 percent) that the asset’s fair value exceeds its carrying amount. If this determination can be made, additional testing is not required. However, if the qualitative analysis suggests that it is more likely than not that the carrying amount of the asset exceeds its fair value, the entity would be required to calculate the fair value of the intangible asset and recognize an impairment loss to the extent the fair value exceeds carrying value, as currently required by ASC 350. The PASU includes examples of events and circumstances that an entity should consider when performing the qualitative analysis.
The FASB is currently accepting comments on this PASU and the deadline for comments is April 24, 2012. If passed, the amendments would be effective for impairment tests performed for fiscal years beginning after June 15, 2012, with early adoption permitted. For more information, visit the FASB website.
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