The Financial Accounting Standards Board has issued an accounting standards update intended to simplify the testing of indefinite-lived intangible assets, such as trademarks, licenses and distribution rights, for impairment.

Accounting Standards Update No. 2012-02, “Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment,” aims to simplify the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill. The standard will apply to all public, private and not-for-profit organizations.
The amendments allow an organization the option to first assess the qualitative factors to determine whether it is necessary to perform the quantitative impairment test. An organization that elects to perform a qualitative assessment is no longer required to calculate the fair value of an indefinite-lived intangible asset unless the organization determines, based on a qualitative assessment, that it is “more likely than not” that the asset is impaired.

Under FASB’s former guidance, an organization was required to test an indefinite-lived intangible asset for impairment on at least an annual basis by comparing the fair value of the asset with its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeded its fair value, an impairment loss was recognized in an amount equal to the difference.

“The board expects that the revised guidance will reduce the cost of accounting for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low,” said FASB chair Leslie F. Seidman in a statement.

The amendments in the standards update are effective for annual and interim impairment tests performed for fiscal years beginning after Sept. 15, 2012, although early adoption is also permitted.

The new guidance differs from that of International Financial Reporting Standards in its IAS 36 "Impairment of Assets" standard.

The update and high-level summaries of the update—including a podcast and a “FASB in Focus”— are available on FASB’s Web site at

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