Goodwill Impairment Valuation

Goodwill is generally recognized when a company acquires a business and the purchase price exceeds the fair value of the identifiable net assets acquired, after considering other applicable components of the acquisition accounting. For financial reporting purposes, goodwill is subsequently evaluated for impairment under ASC 350.

Goodwill impairment occurs when the carrying amount of a reporting unit exceeds its fair value, subject to applicable accounting requirements. When impairment is identified, a valuation analysis may be necessary to determine and support the amount of impairment recognized for financial reporting purposes.

Under the private company accounting alternative provided by the Financial Accounting Standards Board (FASB), eligible private companies may elect to amortize goodwill over a period of ten years, or a shorter period if another useful life is more appropriate.

Companies electing this alternative generally test goodwill for impairment when a triggering event indicates that its fair value may be below its carrying amount, rather than performing an annual impairment test.