Impairment Testing: ASC 350, 360 and IAS 36

Impairment, in the context of an acquired business or asset, generally refers to a decrease in book or carrying value of an underlying asset(s) of the company, such as goodwill, customer relationships, a tradename, equipment, or real estate.

Impairment Testing Experts

Impairments are caused by an acquirer not meeting the financial projections established for the acquired assets or enterprises, either due to the acquirer’s overestimation of future performance of the acquired assets/business, or by market conditions beyond the control of the acquirer.

Testing for Impairment has been a part of the US Financial Reporting lexicon for almost 20 years. Under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Subtopic 350-20-35-1, goodwill and certain intangible assets are not amortized by public companies; rather, these assets must be periodically tested for impairment under ASC No. 350, Intangible-Goodwill and Other.

According to ASC 350-20-35-30, goodwill should also be tested for impairment “between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount” (a “triggering event”). Testing is typically performed annually and provides management, auditors, and investors with some assurance that the company’s balance sheet reflects the current expectations. Furthermore, ASC 360 and 842 address the impairment assessment of non-financial long-lived assets such as machinery and equipment, leases, customer relationships and technology.

ASC 350 requires interim impairment testing for public and private companies when certain triggering events occur. The following are examples of possible triggering events^[1]:

Deterioration of macroeconomic conditions
Obsolescence of a product line or equipment
Limitations on accessing capital
Fluctuations in foreign exchange rates
Increased competition
Decline in market multiples
Industry weakening
Change in product/service demand
Industry weakening
Change in product/service demand
Changes in regulatory or political environments
Increased costs
Declining revenues and/or cash flows
Lost customers
Contemplation of bankruptcy
Litigation
Changes in how the reporting unit is structured/the asset group
A sustained decline in share price, if applicable

^[1] As indicated in FASB ASC 350-20-35-3F, these examples are not all-inclusive, and an entity should consider other relevant events and circumstances that affect the fair value of a reporting unit.

Marshall & Stevens performs impairment testing analyses annually for some clients and on an as needed basis for others. Several of our senior valuation professionals have worked in the valuation practices of international public accounting firms doing the same review your audit team will perform. We are happy to coordinate with you and your audit team upon request.

For more information about impairment testing, please contact one of the professionals below or look to the links to the right.

How Marshall & Stevens can help with Impairment Testing

Our Impairment Testing team collaborates with our internal multi-disciplinary professionals to provide the value analyses and fresh independent opinions to fiduciaries, financing sources and investors for public and private company transactions.

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Machinery and Equipment Valuation

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Marshall & Stevens provides Fairness and Solvency Opinions, valuation analyses, investigative accounting, and expert witness services to assist public and private clients with their important transactions and litigation matters.

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Client Highlights

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Impairment Testing Contacts at Marshall & Stevens

Darleen Armour

ASA, MBA

Managing Director

Background

Darleen Armour is a Managing Director for the Financial Valuation and Consulting practice with Marshall & Stevens. She is responsible for all financial valuation assignments in the West Region. Ms. Armour leads the Technical Standards Committee for the national Financial Valuation & Consulting practice.

Ms. Armour has been in the valuation business since 1987. Her experience includes Fairness Opinions, Solvency Opinions and the valuation of businesses, intangible assets, and securities for financial reporting purposes (purchase price allocation and impairment), estate and gift tax reporting, equity compensation/stock options (IRC 409A), ESOPs, and litigation support.

Ms. Armour works with public and private companies in a wide range of industries. She has a great amount of experience in the valuation of entertainment and media companies and their intangible assets including film libraries and music catalogs.

Prior to joining Marshall & Stevens, Ms. Armour has served as Director of BDO’s Valuation and Business Analytics practice, Senior Vice President at FMV Opinions, Inc., and Senior Vice President at Houlihan Lokey Howard & Zukin, Inc.

Ms. Armour served as an Adjunct Professor at California State University, Fullerton teaching a Graduate Level Business Valuation/Mergers & Acquisition Course from 2010 to 2018.

Ms. Armour has been qualified as an expert witness, has provided testimony, and been a neutral third appraiser in arbitration and legal proceedings.

She is an active member of the Association for Corporate Growth having served on the Orange County Board of Directors from 2001 – 2020 and is a member of the Membership Committee for the Los Angeles Chapter of the Association for Corporate Growth.

Professional Highlights

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Member, Association for Corporate Growth
- Membership Committee, Los Angeles Chapter
- Orange County Board of Directors, 2001-2020

Marshall & Stevens, Inc.
October 2015-present
‣ Managing Director, Financial Valuation & Consulting, 2019-present
‣ Director, Financial Valuation & Consulting, 2015-2019
BDO
Director, Valuation & Business Analytics, 2014-2015
FMV Opinions
Senior Vice President, 2012-2014
Cronkite & Kissell
Principal, 2001-2012
Houlihan Lokey
Senior Vice President, 1987-2001

California State University, Fullerton
Adjunct Professor, 2010-2018
‣ Business Valuation/Mergers & Acquisitions (graduate level)

David Gaynor

ASA, CEIV

National Practice Leader

Background

David A. Gaynor, ASA, is a National Practice Leader for our Financial Valuation Practice and Managing Director of our Healthcare Valuation Practice. Mr. Gaynor’s responsibilities include overseeing the delivery of valuation services to the Firm’s financial valuation clients.

Mr. Gaynor has more than 22 years of consulting experience, specializing in the valuation of businesses and business interests, intangible assets, liabilities, and complex securities in connection with mergers and acquisitions, financing, estate and gift tax planning, charitable contributions, litigation support services, strategic planning, fairness opinions, Employee Stock Ownership Plans (ESOPs), accounting matters, and recapitalizations. Mr. Gaynor has served clients in a wide variety of industries, including the healthcare, food & beverage, restaurant, consumer products, telecommunication and manufacturing industries.

Prior to joining Marshall & Stevens, Mr. Gaynor led the Healthcare Valuation Group at Crowe, LLP. He has also been employed at CohnReznick, LLP and EisnerAmper, as well as Management Planning Inc. and Pluris Valuation Advisors, LLC.

Mr. Gaynor earned a Bachelor of Science in Finance from The College of New Jersey in Ewing, NJ.

Mr. Gaynor is an Accredited Senior Appraiser (ASA) in business valuation with the American Society of Appraisers. In addition, Mr. Gaynor is a Member of the Appraisal Issues Task Force (AITF), a Board Member of the Towson University Family Network, and a Member of the Montgomery Township, NJ Budget and Finance Committee. Mr. Gaynor is a frequent writer and speaker on valuation topics.

Professional Highlights

Member, Appraisal Issues Task Force
Board Member, Towson University Family Network
Member, Montgomery Township, NJ Budget and Finance Committee

Marshall & Stevens, Inc.
December 2019-present
‣ Managing Director, Northeast Financial Valuation Practice Leader, 2023-present
‣ Managing Director, 2019-2023
Crowe
February 2014-November 2019
‣ Managing Director, Healthcare Valuation Services Leader, 2019
‣ Senior Manager, 2014-2019
CohnReznick LLP
Senior Manager, 2012-2014
Pluris Valuation Advisors LLC
Vice President, 2010-2012
Management Planning, Inc.
Vice President, 2008-2010
Valuation Research Corporation
Vice President, 2007-2008
Crowe Horwath LLP
Manager, 2004-2007
EisnerAmper
Supervisor, 2002-2003

James Sieman

ASA

Managing Director

Background

James Sieman serves as a Principal and Managing Director for the Financial Valuation & Consulting practice of Marshall & Stevens Incorporated. Mr. Sieman is responsible for all financial and multidisciplinary assignments in the Southeast Region.

Active in the valuation profession since 1998, Mr. Sieman provides financial valuation and consulting services to private sector clients and publicly traded companies in a broad range of industries as well as to government agencies. Areas of specialization include complex valuation studies and consulting engagements requiring a financial or multidiscipline approach relating to Fairness Opinions for mergers & acquisitions, intellectual and other intangible property for allocation (ASC 805) and transfer pricing, estate & succession planning and reporting, employee stock ownership plans (ESOPs), stock options, warrants, SARS, etc. (ASC 718/IRC 409a), recapitalizations and equity financing, bankruptcy, reorganization, divestitures, litigation support for dissolutions, stockholder and ad valorem disputes, and SEC and IRS Compliance.

Mr. Sieman received a B.S. degree in Finance from Purdue University. He attends numerous educational seminars in valuation theory and practice. Mr. Sieman is an Accredited Senior Appraiser (ASA) of the American Society of Appraisers.

Professional Highlights

Marshall & Stevens, Inc.
Managing Director, 2009-present
Kroll
Director, 2005-2008
Shepard Schwartz & Harris LLP
Director, 2003-2005
Marshall & Stevens, Inc.
Manager, 1998-2003