Long-Lived Asset Impairment Testing

ASC 360 (formerly SFAS 144), Accounting for the Impairment or Disposal of Long-Lived Assets, governs the accounting treatment of finite-lived assets. As in ASC 350, a two-step test is required to evaluate goodwill impairment. However, unlike ASC 350, the initial test entails the utilization of undiscounted cash flows associated with the finite-lived asset. An impairment loss is recognized only if the carrying value of the asset is not recoverable and exceeds its fair value. The carrying value is considered unrecoverable if it exceeds the sum of the undiscounted cash flows anticipated from the use and disposition of the asset. Impairment loss is measured as the amount by which the carrying value of an asset exceeds its fair value.

Historically, accounting for business combinations has been one of the most controversial issues in financial reporting. With the rapid pace of change in today’s marketplace-driven by technological advances, new business models and other factors-the role of financial reporting in maintaining stability of capital markets will only increase. ASC 805 and 350 address critical issues of currency and accuracy in financial reporting.

The Securities & Exchange Commission continues to scrutinize the new subjective valuations arising from ASC 805 and 350, and the agency continues to pay particularly close attention to how those valuations are incorporated in purchase price allocations for mergers and acquisitions. That being the case, it is critical that companies hire a reputable firm to provide expert valuations and goodwill impairment opinions under these accounting rules. Contact Appraisal Economics to learn how our personnel, expertise and research resources required to provide the kind of ASC 805/350/360 valuations that will stand up to SEC scrutiny. We are highly experienced in mergers, acquisitions, divestitures and related services, and have worked on many such transactions, both domestically and internationally. A goodwill valuation and impairment opinion from Appraisal Economics is the product of a comprehensive analysis that takes into account all areas of concern to the SEC.