Hot Topic: Impairment

The past several months have seen threats of a recession, increasing inflation, declining share prices, the Russia-Ukraine war and rising interest rates, all of which have created economic uncertainty. Although there has been much focus on the economic impact of these trends and events, the accounting impacts cannot be overlooked. Do these economic trends and events represent triggering events for impairment testing? Do any of these considerations affect a fair value analysis? In this Hot Topic, we discuss impairment considerations for goodwill, indefinite-lived intangible assets and long-lived assets.

Applicability

All entities

Key impacts

• Due to the current economic environment, companies may need to consider whether the impact of macroeconomic conditions, such as inflation, a sustained decline in stock price or an increase in cost of capital may be impairment triggering events for goodwill, indefinite-lived intangible assets and long-lived assets.
• After a triggering event, or when performing an annual impairment assessment, the impact of these same economic conditions are also considered when determining fair value.
• A public company is required to disclose the potential for material impairment charges even if it has determined that no impairment charge is necessary for the current reporting period.

Report contents

• Goodwill
  
• Determining fair value
  
• Indefinite-lived intangible assets
  
• Long-lived assets
  
• Disclosures