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Impairment
Goodwill and non-amortized identifiable intangible
assets should be tested for impairment annually and on an interim basis
if an event or circumstance, such as an adverse change in the business
climate or market, might reduce the fair value of a reporting unit below
its carrying value.
Goodwill should also be tested for impairment on an
interim basis if
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a reporting unit or portion thereof is
likely to be sold or disposed of, and
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a significant asset group of the reporting
unit has been tested for recoverability under FASB Statement
121.
The impairment test involves deducting the fair value of
the identified tangible and intangible assets from the fair value of the
reporting unit. If the remainder is less than the carrying value of
goodwill, an impairment charge is recorded in the operating expense
section of the income statement.
Within six months of adoption, companies are required to
perform a transitional goodwill impairment test for all reporting units
that have goodwill from a prior acquisition. An impairment loss
associated with this test shall be recognized as the effect of a change
in accounting principle.
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