Goodwill and Intangible Assets Impairment

Pursuant to ASC 350 ( formerly FAS 142), Intangibles-Goodwill and Other, companies are required to test recorded goodwill and indefinite lived intangible assets for impairment at least annually and whenever circumstances indicate potential impairment in those assets. Additionally, ASC 360 (formerly FAS 144), Property, Plant and Equipment, requires similar testing of long-lived assets, including intangible assets. Rede Consulting services in assisting the companies with their goodwill and intangible asset impairment testing activities include:

·        Two-step process for testing recorded goodwill amounts for impairment. The first step of the goodwill impairment test involves estimating the Fair Value of a reporting unit and comparing this Fair Value to its carrying value, which is defined as the book basis of total assets less total liabilities. In the event a reporting unit’s carrying value exceeds its Fair Value, evidence of potential impairment exists and a second step is required. Step 2 involves allocating the Fair Value of the reporting unit to all of its assets and liabilities on a Fair Value basis, with the excess amount representing the Fair Value of goodwill. An impairment loss is then measured as the amount, if any, by which the carrying value of the reporting unit’s goodwill exceeds the estimated Fair Value of that goodwill

·         Two-step process for testing certain recorded intangible assets for impairment. The first step of the asset impairment test involves estimating the total undiscounted cash flows expected to be generated by the asset (or asset group) over its remaining economic life. In the event the carrying value of the asset exceeds the estimated total undiscounted cash flows, evidence of impairment exists and a second step is required. Step 2 involves estimating the Fair Value of the asset, with the impairment loss calculated as the amount by which the carrying value exceeds the Fair Value of the asset.