Impairment of Goodwill and Other Intangible Assets

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Valuation is a critical component of accounting for goodwill since FASB Statement No. 142, Goodwill and Other Intangible Assets , was enacted. Amortization of goodwill and certain intangible assets was replaced with an annual "impairment test".

Rather than being amortized over 40 years, goodwill is now maintained on the balance sheet indefinitely unless it is impaired. Under this new environment, companies annually compare a reporting unit's book equity to its fair value (which is determined through acceptable valuation methods). Strategic Valuation Group has assisted companies with this in a variety of ways depending on the level of assurance desired by the company and their auditors. In situations where the CFO anticipates doing the annual testing, Strategic Valuation Group can provide initial consultative services in developing appropriate models and if needed, subsequently review computations for appropriateness. On the other hand, when the financial reporting team requires outside testing, Strategic Valuation Group's competency meets that need by providing the highest level of independent expertise.

Furthermore, when a company fails its impairment test, Strategic Valuation Group relies on its expertise in purchase price allocation to accurately quantify the amount of impairment, if any.

Only those appraisers with proper training, independence and experience should be relied upon to document the amount of impairment expense recognized on a company's income statement or, on the other hand, certify that the value of a company's goodwill has been maintained. Public and private companies, along with their independent auditors, can be comfortable that our Step One and Step Two appraisals are accurate.