Goodwill Impairment Testing Services – XoraH PLLC

Goodwill Impairment Testing Services

Intro to Services

Every company that has completed an acquisition carries goodwill on its balance sheet — and every year, that goodwill must be tested for impairment under ASC 350. It is one of the most judgment-intensive areas of financial reporting, requiring assessment of reporting unit fair values, qualitative risk factors, and business performance against the expectations that drove the original acquisition price. Done poorly, goodwill impairment testing creates audit risk and potential misstatements. Done well, it produces a defensible, well-documented conclusion that satisfies auditors and stakeholders.

Our goodwill impairment testing services provide the technical accounting expertise and process discipline to complete your annual or interim impairment assessment accurately and efficiently. We serve private companies and PE-backed businesses throughout Florida and nationwide.

How Goodwill Impairment Testing Works Under ASC 350

Under ASC 350, Intangibles — Goodwill and Other, companies are required to test goodwill for impairment at least annually, at the reporting unit level. The standard provides a two-pathway approach:

Step Zero — Qualitative Assessment

Companies may elect to perform a qualitative assessment — commonly referred to as Step Zero — to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment concludes that impairment is more likely than not, the company must proceed to the quantitative test. If not, no further testing is required for that year.

The qualitative assessment considers macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, and other entity-specific events. We perform rigorous qualitative assessments that are documented to support the conclusion and withstand auditor review.

Quantitative Impairment Test

The quantitative test requires estimating the fair value of each reporting unit and comparing it to the reporting unit’s carrying amount — including allocated goodwill. If the carrying amount exceeds fair value, the company recognizes a goodwill impairment charge equal to the excess, not to exceed the total carrying amount of goodwill allocated to the reporting unit.

Reporting unit fair value is typically estimated using a combination of income approach methods (discounted cash flow analysis) and market approach methods (guideline public company multiples or comparable transaction multiples). We coordinate the fair value analysis, review the valuation inputs for reasonableness, and integrate the valuation conclusions into the impairment testing documentation.

Our Goodwill Impairment Testing Services

Reporting Unit Identification and Goodwill Allocation

Before testing begins, reporting units must be properly identified and goodwill must be appropriately allocated to those units. We help companies determine their reporting unit structure under ASC 350, assess whether reporting unit changes have occurred, and allocate or reallocate goodwill using a relative fair value methodology when required.

Annual Impairment Assessment Planning

We work with management to plan the annual impairment assessment — selecting the testing date, determining whether Step Zero or the quantitative test is appropriate for each reporting unit, and establishing the documentation framework. Thoughtful planning upfront reduces the time and cost of completing the assessment.

Qualitative Assessment Documentation

We prepare a comprehensive qualitative assessment memo that systematically evaluates the relevant factors for each reporting unit, documents the evidence considered, and supports the Step Zero conclusion. Our memos are structured to align with auditor expectations and provide a clear record of management’s judgment.

Quantitative Test Support

For reporting units requiring a quantitative fair value analysis, we coordinate with your valuation specialist, review the fair value inputs and assumptions for GAAP compliance and reasonableness, and integrate the valuation conclusions into the impairment test calculation. We also advise on the selection of appropriate valuation methodologies and market comparables.

Triggering Event Assessment

Between annual testing dates, companies must monitor for triggering events — circumstances that indicate it is more likely than not that a reporting unit’s fair value has fallen below its carrying amount. Triggering events include significant adverse changes in business climate, loss of key customers, covenant violations, and a sustained decline in stock price. We help companies identify and assess triggering events as they arise and determine whether an interim impairment test is required.

Impairment Charge Calculation and Disclosure

When an impairment exists, we calculate the impairment charge, advise on the income statement presentation, and draft the required financial statement disclosures under ASC 350 — including a description of the facts and circumstances that led to the impairment and the amount of the charge by reporting unit.

Who Needs Goodwill Impairment Testing Support

• Private companies and PE-backed businesses that have completed one or more acquisitions
• Companies whose internal accounting team lacks the technical depth to complete a defensible impairment assessment
• Businesses facing a potential impairment indicator — declining revenue, margin compression, or adverse market conditions
• Companies preparing for an audit where goodwill impairment documentation is incomplete
• Businesses that have recently reorganized their reporting unit structure and need to reallocate goodwill