A new article was recently posted to Mercer Capital's website: "Recession, Market Meltdown Put Spotlight on Goodwill Impairment" by Travis W. Harms, CFA, CPA/ABV, a senior member of Mercer Capital's Financial Statement Reporting Group. The article begins:
For auditors and financial statement preparers, the bear market suggests that the goodwill reported on many corporate balance sheets may be impaired. The accounting for goodwill, the amount paid in excess of net identifiable assets in previous acquisitions, is set forth in SFAS 142, Goodwill and Intangible Assets. SFAS 142 provides for an annual impairment test for goodwill, rather than systematic amortization as under prior guidance. The two-step impairment test starts with a comparison of the reporting unit’s fair value to carrying value. Impairment is indicated if the fair value of the reporting unit is less than carrying value. Step 2 of the impairment test involves quantifying the amount of impairment by determining the implied fair value of the reporting unit’s goodwill. ...
... Regardless of a company’s regular annual testing date, SFAS 142 prescribes an interim test upon occurrence of an event or change in circumstances that would more likely than not reduce the fair value of the reporting unit below its carrying amount. In our practice, we are observing many audit firms that regard the sharp decline in stock prices and the general economic uncertainty to be triggering events for an interim impairment test.
To read the entire article, click here.