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Under generally accepted accounting principles (GAAP), the acquirer in the purchase of a business is required to allocate the purchase price to the identified assets acquired as part of the transaction. After the initial purchase price allocation, GAAP provides guidance from the subsequent measurement.  The accounting for intangible asset impairment is outlined under ASC 350 – Intangibles – Goodwill and Other.

ASC 350 indicates that goodwill shall be tested at least annually for impairment, with impairment being the condition that exists when the carrying amount of a reporting unit that includes goodwill exceeds its fair value.  A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.

The goodwill impairment test is a comprehensive and multi-step process that begins with an optional qualitative assessment.  Many factors can lead to an impairment (or possible impairment) including but not necessarily limited to a material deterioration in general economic conditions, a deterioration in the subject company’s industry, lackluster financial performance (actual or relative to plan), and other entity-specific events such as major changes in management, strategy, or customers.  A detailed review of the impairment test process may be found here.

GAAP outlines separate rules for the subsequent measurement of finite-lived intangible assets.  Such assets — those that are subject to amortization — shall be reviewed for impairment in accordance with the impairment or disposal of long-lived assets subsections of ASC 360.  As such, an impairment loss shall be recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value.

In summary, the accounting rules relative to the impairment of intangible assets are complex and require multi-step analyses.  In addition to initial assessments, supportable valuations of the subject company (reporting unit) and certain intangible assets are highly important.  MPI has the expertise to provide you with valuation guidance regarding both the initial assessment and the valuations.  Our analyses are thorough and well supported and will satisfy the rigors of the audit process.  More importantly, we will save you time and enable a much smoother overall financial statement audit.

Our Office Locations

Get in Touch with our Boston Team:

77 Franklin Street, Suite 403
Boston, MA 02110
(617) 892-6078

Contact: Elliot Rotstein, CAP®

Get in Touch with our Chicago Team:

203 North LaSalle Street, Suite 2100
Chicago, IL 60601
(312) 214-2299

Contact: Tadd A. Lindsay

Get in Touch with our MPI Headquarters:

1000 Lenox Drive
Lawrenceville, NJ 08648
(609) 924-4200

Contact: Mark E. Lingerfield, ASA
Joseph C. Hassan, CFA, ASA

Get in Touch with our New York Team:

10 Grand Central (155 E. 44th Street), Suite 1905
New York , New York 10017
(212) 935-4422

Contact: Daniel M. Kerrigan, CFA
Todd G. Povlich, ASA
John L. Varga, ASA

Get in Touch with our Orlando Team:

5401 S. Kirkman Road, Suite 310
Orlando, Florida 32819
(407) 599-0060

Contact: Roy Meyers, CFA, ASA

Get in Touch with our Philadelphia Team:

Two Logan Square, 100 N. 18th Street, Suite 300
Philadelphia, Pennsylvania 19103
(267) 233-5033

Contact: Mark Lingerfield, ASA
Tracey M. Jasey

Get in Touch with our Connecticut Team:

1720 Post Road East, Suite 214C
Westport, CT 06880
203-893-4244

Contact: William Murray, CPA/ABV/CFF, ASA

Publications

view all publications

By Laura E. Anastasio, ASA, CEIV

Valuation of Intangible Assets

By Todd Povlich, ASA

Estate Planning for Private Fund Principals**COVID-19 Crisis Considerations**

By Koji Bratcher, ASA & Joseph C. Hassan, CFA, ASA

Corporate Planning: Navigating “Value” in Times of Choppy Market Activity

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