Goodwill impairment testing - What's old is new again

Mergers & acquisitions - a snapshot Dec 01, 2008

This edition focuses on some of the issues companies may face in preparing goodwill impairment tests. It also serves as a refresher on certain aspects of the framework for conducting those tests.

Overview

The role of fair value in financial reporting has been a hot topic for some time. Much of the debate has generally focused on financial instruments. However, after the credit crisis, impairment testing for non-financial assets has also taken center stage. This is particularly true for historically acquisitive companies that have significant amounts of recorded goodwill on their balance sheets, regardless of industry. This edition of Mergers & acquisitions — a snapshot, focuses on some of the issues companies may face in preparing goodwill impairment tests. It also serves as a refresher on certain aspects of the framework for conducting those tests. Application of the standard can be challenging, and judgments surrounding key assumptions will be critical in assessing goodwill for impairment. Companies may therefore find it helpful to begin the process as early as possible and seek accounting and valuation assistance where needed.

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*This snapshot, updated since its original issuance to reflect changes for, among other things, contacts and branding, contains guidance that remains relevant as of the publication date.

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