FASB Codification Project

“A long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.”

Goodwill is considered impaired when the implied fair value of goodwill in a reporting unit of a company is less than its carrying amount, or book value, including any deferred income taxes. By qualitative factors, if the fair value is less than its book value (likelihood more than 50%), two step of the goodwill impairment test is necessary. According to ASC 350-20-35-2 and 3(A&B&D), if the company determines that it is not more likely than not that fair value is less than the book value, it does

Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.For the purposes of impairment testing, goodwill is allocated to each of the Group 's cash-generating units (CGUs), or groups of CGUs, expected to benefit from the synergies of the business combination. CGUs (or groups of CGUs) to which goodwill has been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.If the recoverable amount of the CGU (or groups of CGUs) is less than the carrying amount of the CGU (or groups of CGUs), the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or groups

If their stock price dropped to ZERO, an impairment would not be required because they are comparing the market price of their stock to their carrying amount of stockholder’s equity, which in a deficit. Also, the Company is anticipating those assets to produce future benefits that exceed its costs.

Where explain the concept of Intangible asset, which represents assets that absence of physical substance. Moreover, Goodwill represents an asset from which is expected future economic benefits, emerge from the acquisition of other assets or business combination. Another important point would be the impartments testing as refers ASC 350-20-35-28 where indicates that Goodwill of reporting unit must be tested for impairment annually. The test can be accomplished at any time in the fiscal year. In the case of different reporting unit, the impairment test could be at different times. This citation in the memorandum was provided incorrect (ASC 305-20-35-1 and 28) this encoding does not exist in FASB.

We will discuss audit considerations concerning when testing is appropriate for grouping of long-lived assets for purposes of recognition and measurement of an impairment loss.

The following are the required steps to identify, recognize and measure the impairment of a long-lived asset (group) to be held and used:

Goodwill Impairment is the Goodwill that has become or is considered to be of lower value than at the time or purchase. From an accounting perspective, when the carrying value of the goodwill exceeds the fair value, then it is considered to be impaired. Negative publicity about a firm can create goodwill impairment, as can the reduction of brand-name recognition. Since the Financial Accounting Standards Board (FASB) first introduced its standards update on testing for goodwill impairment (ASU 2011-08), entities with goodwill on their balance sheet have had the option when testing goodwill for impairment to first assess qualitative factors as a basis for determining whether it is necessary to perform the traditional two-step approach described in ASC Topic 350. The optional qualitative assessment is commonly referred to as “step zero.”

Based on ASC 320-10-35-34 I mentioned above, the other-than-temporary impairment should be recoded as $28 ($100-$72) as of December 31, 20X1. On January 31, 20X2, when the price of the stock went up to $75, the other-than-temporary impairment should be recoded as $25 ($100-$75). If the share price was $95 instead of $75 on January 31, 20X2, I think no other-than-temporary impairment needs to be recorded, because there is no material decrease occurred.

“A long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.”

Note: General Note The Status Section identifies changes to this Subtopic resulting from Accounting Standards Updates. The Section provides references to the affected Codification content and links to the related Accounting Standards Updates. Nonsubstantive changes for items such as editorial, link and similar corrections are included separately in Maintenance Updates.

In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).

“The costs of introducing a new standard, of course, include the out of pocket costs of converting to the new standard, the costs of processing and reporting the information required, and possible increases in audit cost…..But costs may also include disclosure costs, measured in terms of lost competitive advantage. Even harder to assess are the costs incurred by all parties in attempting to understand,

Under the Section 360-10-35-21 in FASB Codification, a long-lived asset shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Following are some examples of events that would cause an asset to be tested for impairment (FASB Codification 360):

After calculating the fair value of Snowy Ridge’s assets it was necessary to test for impairment. Impairment was tested by comparing the carrying value of each asset to its fair value (see table 2). The carrying value of marketable securities as of June 30th was $4,500,000. The current fair value of marketable securities was found to be 4,565,000, a positive difference of$ 65,000. Changes in marketable securities are reported even without impairment, thus an adjustment was made (see table 3). The carrying value of the mountain division as of June 30th was $12,360,000. The current fair