- financial accounting and reporting for intangible assets acquired individually or
- with a group of other assets (but not those acquired in a business combination) at acquisition.
- financial accounting and reporting for goodwill and other intangible assets, subsequent to their acquisition.
The remaining provisions apply to goodwill that an entity recognizes in accordance with Statement 141 and to other intangible assets that an entity acquires, whether individually, with a group of other assets, or in a business combination.
While goodwill is an intangible asset, the term intangible asset is used in this statement to refer to an intangible asset other than goodwill.
The cost of a group of assets acquired in a transaction other than a business combination shall be allocated to the individual assets acquired based on their relative fair values and shall not give rise to goodwill.
Intangible assets acquired in a business combination are initially recognized and measured in accordance with Statement 141.
Determining the Useful life of an Intangible Asset
An intangible with a finite life is amortized;
An intangible with an indefinite life is not amortized
Useful life is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of that entity.
Intangible Assets Subject to Amortization
If finite, but precise length of life is not known, then amortize over the best estimate of useful life.
Method--shall reflect the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up.
If pattern cannot be reliably, determined, a straight-line method shall be used.
An intangible asset shall not be written down or off in the period of acquisition unless it becomes impaired during that period.
Residual value assumed to be zero unless at the end of its useful life to the reporting entity the asset is expected to have a useful life to another entity and:
- The useful life of an intangible that is being amortized shall be evaluated each reporting period to determine if a revision in the remaining period of amortization is warranted.
- If the useful life is changed, the remaining carrying amount of the intangible shall be amortized prospectively over the revised useful life.
- If an intangible that is being amortized is subsequently determined to have an indefinite life, the asset shall be tested for impairment in accordance with paragraph 17. The intangible shall no longer be amortized and shall be accounted for in the same manner as other intangibles not subject to amortization.
An intangible that is subject to amortization shall be reviewed for impairment in accordance FAS 121 by applying the recognition and measurement provisions of paragraphs 4-11 of that statement. (changed by FAS 144).
- If an intangible is determined to have an indefinite useful life, it shall not be amortized until its useful life is no longer indefinite.
- An entity shall evaluate the remaining useful life of an intangible that is not being amortized each reporting period to determine whether events and circumstances continue to support an indefinite useful life.
- If it is subsequently determined that the intangible has a definite useful life, the asset should be tested for impairment in accordance with paragraph 17.
- The intangible asset shall then be amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangibles subject to amortization.
An
intangible that is not subject to amortization shall be
tested for impairment
annually, or more frequently if events. . . indicate that
an asset has
been impaired.
The
impairment test shall consist of a comparison of the fair
value of an intangible
with its carrying amount.
if the carrying amount of an intangible asset exceeds its
fair value, an
impairment loss shall be recognized in an amount equal to
that excess.
After
an impairment loss is recognized, the adjusted carrying
amount of the intangible
asset shall be its new accounting basis.
Subsequent
reversal of a previously recognized impairment loss is
prohibited.Goodwill shall be tested for impairment at a level of reporting referred to as a reporting unit.
Impairment--condition that exists when the carrying amount of goodwill exceeds its implied fair value.
(Fair value of goodwill can be measured only as a residual value and cannot be measured directly)
The two-step impairment test discussed in paragraphs 19-22 shall be used to identify potential goodwill impairment and measure the amount of a goodwill impairment losss to be recognized (if any).
compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; step two therefore is unnecessary.
If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed to measure the amount of impairment loss, if any.
compare the implied fair value of reporting unit goodwll with the carrying amount of that goodwill. (use guidance in paragraph 21 to estimate the implied value.)
If the carrying amount of reporting unit goodwill exceeds the implied value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.
The loss recognized cannot exceed the carrying amount of goodwill.
After a goodwill impairment loss is recognized, the adjusted carrying amount of goodwill shall be its new accounting basis.
Subsequent reversal of a previously recognized goodwill impairment loss is prohibited once the measurement of that loss is completed.
The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied value of goodwill.
This allocation process is performed only for purposes of testing goodwill for impairment; assets and liabilities should not be written up or down, nor should any previously unrecognized intangible asset be recognized as a result of this allocation process.
.
Must disclose the fact that the measurement of the impairment loss is an estimate.
Any adjustment to that estimated loss based on the completion of the measurement of the impairment loss shall be recognized in the subsequent reporting period.
Thus, the fair value of a reporting unit refers to the amount at which the unit as a whole could be bought or sold in a current transaction between willing parties.
Quoted market prices are the best evidence of fair value and should be used as the basis for the measurement, if available.
A present value technique is often the best available technique with which to estimate the fair value of a group of net assets....
Does not preclued presentation of individual intangible assets or classes of intangible assets a separate line items.
The amortization expense and impairment losses for intangible assets shall be presented in income statement line items within continuing operations....