ASC 350: Goodwill and Intangible Asset Impairment Testing
Under ASC 350, companies are required to test goodwill and certain indefinite-lived intangible assets for impairment on at least an annual basis, or more frequently if triggering events occur. These impairment tests are essential for maintaining compliance with U.S. GAAP and ensuring that a company’s financial statements reflect the true value of its assets.
Goodwill and intangible asset impairment testing requires a careful analysis of reporting units, projected cash flows, market conditions, and fair value methodologies. It’s a complex process that demands both technical rigor and sound professional judgment, especially as accounting standards and auditor expectations continue to evolve. Whether you’re preparing for an annual review or responding to a triggering event, an accurate, defensible valuation helps protect your business from audit challenges, restatements, and financial misstatements.
The Purpose
ASC 350 impairment testing serves a critical purpose: to ensure that the carrying value of goodwill and certain intangible assets accurately reflects their fair value. When these assets no longer reflect fair value on the balance sheet—whether due to market shifts, operational changes, or declining performance—it can distort financial reporting and mislead stakeholders.
A robust impairment analysis helps companies stay compliant with accounting standards, maintain transparency with investors and regulators, and avoid costly restatements or audit issues. It also provides valuable insight into the financial health of business units, enabling better strategic decision-making. Whether due to an acquisition, restructuring, or broader economic shifts, timely and accurate impairment testing helps safeguard credibility and support long-term business planning.
The Redwood Advantage
At Redwood Valuation, we combine deep technical expertise with a rigorous, audit-ready approach to ASC 350 impairment testing. Our team of valuation professionals—including ASAs, CFAs, and CPAs—has extensive experience supporting clients through complex goodwill and intangible asset analyses across a wide range of industries.
We tailor each analysis to the unique characteristics of your reporting units and intangible assets—leveraging industry-specific data, thorough reviews of cash flow projections, and appropriate valuation methodologies. Whether you need a full impairment test or a preliminary qualitative assessment (Step 0), we deliver clear documentation, responsive service, and defensible valuations that stand up to auditor scrutiny.
When it comes to financial reporting compliance, precision and credibility matter. Redwood helps you navigate ASC 350 requirements with confidence, backed by the experience, insight, and service quality that sets us apart.
Built for complexity and trusted for clarity, Redwood delivers valuation insights that empower confident decision-making and drive growth.
FAQ
We’ve helped hundreds of startups and established businesses complete valuations. Here are some common questions.
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Goodwill and indefinite-lived intangible assets that are not amortized are subject to ASC 350 testing. These assets must be evaluated at least annually or more frequently if events or changes in circumstances suggest they might be impaired.
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A triggering event is any change in circumstances that indicates an asset’s carrying value may no longer be recoverable. Common examples include operating losses, adverse market conditions, or significant changes in strategy.
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Impairment testing typically involves identifying the relevant reporting unit, estimating its fair value, and comparing that fair value to the carrying amount of the reporting unit (including goodwill). If the carrying amount exceeds fair value, an impairment loss is recognized. The process often requires valuation specialists to apply appropriate methodologies and assumptions.
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Companies must conduct interim impairment testing if triggering events occur that indicate it is more likely than not that an asset is impaired. Examples include significant declines in market value, adverse operational trends, or loss of key contracts.
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When a quantitative test is performed, fair value measurements must be developed in accordance with ASC 820, including appropriate consideration of market-participant assumptions and input observability.
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When impairment is identified, the carrying value of goodwill or intangible assets is reduced to fair value, and the loss is recognized in the financial statements. This adjustment ensures that reported asset values are not overstated and supports reliable financial reporting.
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Many companies engage independent valuation specialists to support objectivity, reduce conflicts of interest, and strengthen audit support—particularly for complex or judgment-sensitive assets.
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