Perspectives: Using Qualitative Impairment Testing For Indefinite Lived Intangible Assets

ASU 2012-02 Intangibles-Goodwill and Other (Topic 350):
Is there an opportunity to reduce testing and gain efficiencies in impairment testing? Testing Indefinite-Lived Intangible Assets for Impairment provides companies an opportunity to do just that. What are the requirements? How are companies making it work to their advantage?

Accounting Standards Update 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (ASU 2012-02), allows companies to apply a qualitative impairment test to intangibles with indefinite-lives. For many companies, this presents an opportunity to reduce the resources used on quantitative impairment tests of core intangible property (e.g., R&D, FCC licenses, etc.).

The revised standard allows an entity to assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not (i.e., a likelihood of more than 50%) that an indefinitely-lived intangible asset is impaired. If an entity concludes that it is NOT likely that the asset is impaired, no further action is required. An entity can choose to perform the qualitative assessment on none, some, or all of its indefinitely-lived intangible assets. In addition, an entity can bypass the qualitative assessment for any indefinitely-lived intangible assets in any period and proceed directly to the quantitative impairment test, and then choose to perform the qualitative assessment in subsequent periods.