Non-amortizable intangibles are tested for impairment at least annually or when a triggering event occurs. Triggering events include but are not limited to the following:
- Macroeconomic conditions: deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, etc.
- Industry and market considerations: deterioration in the entity’s environment, increased competition, change in the market for an entity’s products or services, etc.
- Cost factors: increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows, etc.
- Overall financial performance: negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods, etc.
- Other relevant entity-specific events: contemplation of bankruptcy, litigation, changes in management, key personnel, strategy/customers, etc.
- Events affecting a RU: change in the composition or carrying amount of its net assets, an expectation of divestiture, etc.
- Sustained decrease in share price: consider in both absolute terms and relative to peers.
It should be noted that there are other events not captured within these lists that may be considered as impairment triggers. Companies should be mindful of, and ready to identify, potential impairment indicators as they may occur at any time.