FASB first introduced the concept of “step zero” under its Accounting Standards Update 2011-08, published last September, by which entities may review certain qualitative factors to determine whether goodwill impairment is “more likely than not,” explained Mark Zyla (Acuitas Inc.) during last week’s BVR webinar on the topic. If so, then ASU 2011-88 permits entities to skip the two-step quantitative test under ASC 350 (Intangibles—Goodwill and Other) altogether.
To clarify, the recently proposed ASU 2012-12 extends the qualitative “step zero” testing for goodwill impairment to indefinite-lived assets—or “those assets for which the remaining useful life cannot be determined and therefore are not currently being amortized for financial reporting purposes,” Zyla now tells BVWire. “Under ASC 350, these assets are currently tested for impairment by comparing the fair value as of the test date to the carrying value—which differs from how goodwill or long-lived, amortizable assets are tested for impairment.”
Reminder: Last fall, the AICPA’s Financial Reporting Executive Committee (FinREC) also issued its working draft of Testing Goodwill for Impairment (see BVWire #110-2). The exposure draft is “still open for comment,” says Zyla, a member of the task force that developed the guidance. “One area that we would particularly be interested in is the section and discussions on ‘Step Zero’.” As a BV practitioner, what guidance would you want to see in that area? For preparers, “what additional guidance would you like to see as far as the qualitative factors, beyond what was provided in the actual ASU and to help codify Topic 350?” Zyla asked. Comments are due March 15, 2012; for more information, click here.