How frequently to test for goodwill impairment

The goodwill of a reporting unit should be tested for impairment on an annual basis, which can be performed at the same time in each succeeding year. It is not necessary to test all reporting units at the same time. The accountant should also test the goodwill of a reporting unit for impairment between the normal annual tests if there is a change that would more likely than not reduce its fair value below its carrying amount. Examples of such changes are:

  • Adverse action by a regulator
  • Loss of key personnel
  • Significant adverse change in legal factors
  • The reporting unit is more likely than not to be sold or disposed of
  • There was a goodwill impairment loss for a subsidiary of the reporting unit
  • Unanticipated competition

Related Courses

Accounting for Intangible Assets