Goodwill and Intangible Asset Impairment
Duff & Phelps is a leading provider of goodwill, intangible and long-lived asset impairment testing.
Duff & Phelps provides valuations of goodwill, indefinite-lived intangibles and long-lived assets for impairment testing purposes pursuant to ASC 350, Intangibles – Goodwill & Other (ASC 350) ASC 360 -10, Impairment or Disposal of Long-lived Assets (ASC 360), as well as International Accounting Standard 36: Impairment of Assets (IAS 36).
After initial recognition, goodwill and indefinite-lived intangible assets are tested for impairment under ASC 350 at least annually, or upon the occurrence of a triggering event. Duff & Phelps has developed an in-depth understanding of the valuation requirements of ASC 350, as well as the key areas of concern to auditors and the SEC. Our deep expertise enables us to assist management in identifying areas of impairment risk, while navigating complex corporate structures and their underlying legal entities and/or business divisions.
We can assist you with a variety of issues in the impairment testing of goodwill and indefinite-lived intangible assets, including:
- Assignment of goodwill, acquired assets and liabilities to reporting units.
- Support for the optional Step 0 qualitative assessment as part of the goodwill impairment test and as part of the impairment test for indefinite-lived intangible assets.
- Measurement of the fair value of reporting units, including consideration of market participant assumptions and allocation of shared assets.
- Estimation of the fair value of the debt of the reporting units to derive their respective equity values when the goodwill impairment test is conducted on an equity level.
- Comparison of reporting unit values to the overall entity value to assess the implied Market Participant Acquisition Premium (MPAP) (a.k.a. control premium) inherent in the reporting unit fair value measurements.
- Measurement of the fair value of indefinite-lived intangible assets, including IPR&D.
Duff & Phelps has deep experience in the application of ASC 360 and the assessment of the recoverability and fair value of long-lived assets, including property, plant and equipment and finite-lived intangible assets.
The recoverability of a long-lived asset is assessed individually (or in the context of a group of assets), based on the lowest level of identifiable cash flows that are independent from the cash flows of other assets, and over the economic life of the asset (or the primary asset of the group). If it is determined that the asset (or asset group) is not recoverable, an impairment loss is recognized based on the difference between the carrying amount and fair value of the asset (or group).
We can assist you with a variety of issues in determining the recoverability and fair value measurement, as required, of long-lived assets, including:
- Identification of the appropriate ASC 360 asset groups.
- Analysis of projections to assess whether the undiscounted amounts provide for the recoverability of the asset or group.
- Measurement at fair value of the asset (or group) using appropriate valuation methods, for those assets (or groups) that fail the recoverability test.
- Measurement of the fair values of the assets comprising an asset group, to assist management with the allocation of impairment loss.
IAS 36 requires the testing of goodwill, indefinite-lived intangible assets and long-lived assets within its scope when indicators of impairment exist, or at least on an annual basis for goodwill and indefinite-lived intangibles. Goodwill is tested at a cash generating unit (CGU) level and is a single step test comparing the carrying value of the CGU to its recoverable amount, which is the higher of Value in Use (VIU) or Fair Value Less Costs of Disposal (FVLCD). Goodwill impairment tests under IFRS frequently give materially different results compared to those under U.S. GAAP due to the difference in the frameworks underlying the impairment tests.
Duff & Phelps has developed an in-depth understanding of the valuation requirements of IAS 36, as well as the key areas of concern to auditors and regulators. We can assist you in many areas, including:
- Allocation of goodwill to CGUs.
- Practical insight on the nuances of the IAS 36 impairment test requirements and its application.
- Measurement of the VIU and FVLCD of CGUs.
- Measurement of the fair value of indefinite-lived assets and other assets within the scope of IAS 36 that generate cash flows that are largely independent from those of other assets.
Business Combinations / Purchase Price AllocationBusiness Combinations / Purchase Price Allocation
Business Valuation ServicesBusiness Valuation Services
Derivatives Valuation and Shares-Based CompensationDerivatives Valuation and Shares-Based Compensation
Fresh Start AccountingFresh Start Accounting
Intellectual Property / Intangible Asset ValuationIntellectual Property / Intangible Asset Valuation
Machinery and Equipment ValuationMachinery and Equipment Valuation
Strategic Value AdvisoryStrategic Value Advisory
Tax ValuationTax Valuation
Valuation Services for SPACsValuation Services for SPACs
Comprehensive transfer pricing advisory covering compliance, planning, controversy and implementation.
Innovative tax advisory and compliance services encompassing property tax, sales and use tax, and site selection and incentives.
Distressed M&A and Special Situations
Financial and operational solutions for distressed and special situations.
Middle-market M&A advisory differentiated by industry expertise and superior deal execution.
Transaction Advisory Services
Seamless analytical advisory through the deal continuum, from transaction origination to closing.
Fixed Asset Management and Insurance Solutions
Fixed asset inventory reconciliation, management and property insurance appraisal.
Emergence through Fresh-Start Reporting
European Industry Market Multiples (As of September 30, 2020)
North American Industry Market Multiples (As of September 30, 2020)
Fresh Start Accounting – A Busy CFO’s Perspective
Goodwill impairments for listed U.S. firms surpassed $143 billion in 2020 according to data received by February 28 of this year. Read more.