Following up on the FASB's Wallace) says that the introduction of a qualitative assessment option “may help reduce costs for indefinite-lived intangible assets that are difficult to value, such as in-process research and development.” Given the board’s recent adoption of a similar qualitative assessment option in connection with goodwill impairment, Pursel believes the proposed ASU “will be adopted with minimal changes.”
By establishing a qualitative framework similar to that used in assessing goodwill impairment, the proposed ASU should permit financial statement preparers to follow “a similar analytical and documentation process,” Pursel adds. “However, any time the unit of valuation is reduced (in this case from business unit to individual intangible asset), the likelihood of impairment exists.” Pursel provides this example:
Take a reporting unit with goodwill and two identifiable intangible assets, Brand A and Brand B, on its balance sheet. The success of the reporting unit’s Brand A product can offset problems faced by its Brand B product. As a result, although a qualitative assessment may indicate that the reporting unit’s goodwill does not require a quantitative impairment test, the same conclusion would not likely be true for Brand B.
Get a complete update on the AICPA IPR&D aid: On Thursday, February 9, join David Dufendach (Grant Thornton) for The State of IPR&D: Examining the AICPA Exposure Draft. Dufendach, a member of the task force that developed the proposed AICPA practice aid, Assets Acquired to Be Used in Research and Development Activities, will discuss its contents, current feedback, and how practitioners can participate in finalizing the guidelines.