# Goodwill and long-lived asset impairment testing under ASC 350, ASC 360 and IAS 36

Canonical: https://finbryn.com/us/services/technical-accounting-advisory/impairment-testing-asc-350-360-ias-36

Finbryn provides goodwill and long-lived asset impairment testing support under ASC 350, ASC 360 and IAS 36: triggering event write-ups, carrying amounts, forecast-based models and draft disclosures for management. Checked 2026-10-16: ASU 2021-03 lets private companies evaluate goodwill triggering events as of each reporting date.

Goodwill sits on the balance sheet at what was paid, and every year somebody has to show it's still worth that. Most private companies don't test it until the auditor asks. By then the questions are practical ones: which reporting unit holds the goodwill, what is its carrying amount, who prepared the forecast and does last year's forecast match what happened.

Finbryn prepares the analysis, schedules and draft disclosures for management to review and adopt. Management owns the conclusion and the company's auditor decides whether it is acceptable. Fair value of a reporting unit rests on management's forecasts and, where needed, an independent valuation specialist; Finbryn issues no valuation opinion.

The page covers three tests that get confused. Goodwill under ASC 350 is tested for the reporting unit. Long-lived assets such as equipment, capitalized software and right-of-use assets are tested under ASC 360 at the asset group level. IAS 36 covers both in a single standard and tests at the level of the cash-generating unit. A company that reports under US GAAP to its lender and under IFRS to its parent can face all three in the same year.

Where goodwill comes from matters too. If the balance came out of a recent deal, the allocation lives on the [purchase accounting page](/services/technical-accounting-advisory/purchase-accounting-ppa-asc-805-ifrs-3). For the tangible side, the [fixed asset schedules page](/services/accounting-services/fixed-asset-accounting-depreciation-schedules) keeps the carrying amounts the test starts from, and the [software capitalization page](/services/technical-accounting-advisory/capitalized-software-asc-350-40) covers the other asset class that tends to turn up in a write-down.

What you get: Reporting unit and asset group map with carrying amounts; Triggering event assessment written up as of the test date; Forecast-based fair value model built on management's inputs; Sensitivity table on discount rate and growth; Draft impairment footnote and journal entries

Software we work in: Microsoft Excel, QuickBooks Online, NetSuite

## Do you have to test goodwill every year?

Under US GAAP, yes, unless you've elected the private company alternative. ASC 350-20-35-28 requires an annual test of each reporting unit, at any point in the fiscal year as long as it is the same point every year, plus a test between annual dates when something changes (35-30).

You can start with a qualitative look. An entity has an unconditional option to skip it and go straight to the numbers (35-3B). The qualitative step asks whether it is more likely than not that the fair value of a reporting unit is below its carrying amount. If not, you stop.

The quantitative test, as simplified by [ASU 2017-04](https://storage.fasb.org/ASU2017-04.pdf), compares the fair value of the reporting unit with its carrying amount. The loss is the shortfall, capped at the goodwill allocated to that unit, and any tax effect of deductible goodwill is considered. The old second step is gone. For private companies the Update applies to tests in fiscal years beginning after December 15, 2022, the date ASU 2019-10 set when it deferred the original one.

[IAS 36](https://www.ifrs.org/issued-standards/list-of-standards/ias-36-impairment-of-assets/) also requires an annual test for goodwill acquired in a business combination, and for indefinite-life and not-yet-available intangibles.

## What counts as a triggering event?

A triggering event is a change after the last test that makes an impairment more likely than not. The Codification lists examples at 350-20-35-3C(a) through (g), and the list isn't exhaustive:

- **Macroeconomic conditions:** weaker general conditions, tighter access to capital, currency moves.
- **Industry and market:** more competition, lower market multiples, a regulatory or political change.
- **Cost factors:** raw material or labor cost increases that cut earnings and cash flow.
- **Overall performance:** negative or declining cash flows, or revenue and earnings below plan and prior periods.
- **Entity-specific events:** changes in management, key staff, strategy or customers; litigation; bankruptcy contemplation.
- **Events affecting a reporting unit:** a change in its net assets, an expected sale of part of it, or an impairment at a subsidiary.
- **Share price:** a sustained decrease, where there is one.

Private companies get relief. [ASU 2021-03](https://storage.fasb.org/ASU%202021-03.pdf) offers a private company or not-for-profit the alternative of evaluating triggering events as of the end of each reporting period, so it doesn't have to monitor all year or work out when a trigger occurred. The Update added no new disclosures and is effective for fiscal years beginning after December 15, 2019, applied prospectively. Whichever route you take, the triggering event memo should be dated as of the reporting date and keep to the facts known then.

## Can a private company amortize goodwill instead?

Yes. Under the Private Company Council alternative in ASC 350-20-35-62 onward, a private company can amortize goodwill on a straight-line basis over 10 years, or fewer if it shows a shorter useful life is more appropriate (35-63). It then elects at adoption to test at the entity level or the reporting unit level (35-65), and tests only when a triggering event occurs (35-66).

That trades annual testing for a recurring expense. Amortization lowers reported earnings every year, so check how your credit agreement defines EBITDA and net income before electing. A company that has taken the further alternative in ASU 2014-18, to leave certain intangibles inside goodwill, must also adopt this one.

IFRS offers no amortization route for goodwill under IAS 36 and IFRS 3. A US subsidiary on this alternative therefore carries a GAAP-to-IFRS difference every year, which belongs in the bridge for the [IFRS reporting pack](/services/month-end-close-reporting/ifrs-reporting-packs-us-subsidiaries).

## How does the long-lived asset test differ?

Equipment, capitalized software, right-of-use assets and finite-life intangibles are tested only when an indicator appears, such as a significant decrease in market price, an adverse change in use, a cost overrun or a history of operating losses (listed in [FASB Statement 144](https://storage.fasb.org/aop_fas144.pdf), now ASC 360-10). The test applies to an asset group, the lowest level with largely independent cash flows.

| Point | US GAAP (ASC 360, ASC 350) | IFRS (IAS 36) |
| --- | --- | --- |
| Test for long-lived assets | Two steps: undiscounted cash flows against carrying amount, then fair value | One step: carrying amount against recoverable amount |
| Recoverable amount | Not used | Higher of fair value less costs of disposal and value in use (discounted) |
| Level of testing | Asset group; goodwill at the reporting unit | Cash-generating unit; goodwill group no larger than an operating segment |
| Goodwill loss | Shortfall against fair value, capped at goodwill | Goodwill reduced first, then other assets pro rata |
| Reversal | Prohibited for assets held and used | Allowed except for goodwill, capped at the amount without the loss |

If goodwill and another asset in the same reporting unit are tested together, ASC 350-20-35-31 has the other asset tested first, and any loss is booked before the goodwill test runs.

## What goes into the fair value model?

The model is management's. It starts from the forecast the board approved, converts it to cash flows, discounts them at a rate that reflects the risk of the reporting unit, and adds a terminal value. A market cross-check, such as multiples from comparable businesses or the price paid in the original deal, tests the answer.

Finbryn builds the model shell, ties the carrying amount to the trial balance, formats the sensitivity table (discount rate against terminal growth, typically) and writes the memo. The inputs that carry judgment, the discount rate and the market comparables, come from management or the independent specialist it engages. The fair value concepts behind them are explained on the [ASC 820 and IFRS 13 fair value measurement page](/services/credit-loss-derivatives-fair-value/fair-value-measurement-asc-820-ifrs-13).

Two checks save time with an auditor. Back-test last year's forecast against actual results and explain any miss. And reconcile the sum of the reporting unit values to the company's own market value, whether a recent financing round, an offer or an equity valuation, so the total isn't a surprise.

If the headroom is thin, say so in the memo and show what happens at a half-point change in the rate. The reader should never be the first to find the sensitivity.

## What will the auditor test, and where does a loss show up?

Auditors apply SAS 143 to estimates such as a fair value in a goodwill test. It took effect for audits of periods ending on or after December 15, 2023 (GAO summary of AICPA standards) and covers the auditor's responsibilities for accounting estimates and for indicators of possible management bias. In practice that means they test the data behind the forecast, the method, the discount rate support and whether last year's estimate was close.

An impairment loss goes through earnings in the period recognized. Under IFRS 18, effective for annual periods beginning on or after 1 January 2027, a goodwill impairment loss falls in the operating category of the statement of profit or loss, as the IFRS Foundation's illustrative presentation shows.

Expect these follow-on effects: a deferred tax adjustment if the goodwill was tax-deductible, a covenant calculation if the credit agreement uses earnings or net worth, and a lower base for future amortization or depreciation on any written-down asset. Finbryn lists them in the memo so the finance lead sees all of them at once. The [financial statement preparation service](/services/accounting-services/financial-statement-preparation) carries the write-down into the statements and notes.

## The process

1. **Map reporting units and asset groups**: List where goodwill and long-lived assets sit, with carrying amounts tied to the trial balance.

2. **Assess triggering events**: A dated memo against the ASC 350-20-35-3C examples and the ASC 360 indicators.

3. **Choose the test path**: Qualitative or quantitative under US GAAP, or the private company alternative; recoverable amount under IAS 36.

4. **Build and back-test the model**: Forecast, discount rate, terminal value and sensitivities, with last year's forecast compared to actual.

5. **Draft memo, entries and footnote**: Conclusion, journal entries and disclosure text for management to adopt.

## Common problems we fix

| The problem | How we fix it |
| --- | --- |
| Goodwill from an old deal has never been tested and nobody knows which unit it belongs to | We trace the goodwill to the acquisition entries, assign it to reporting units and build a first-year test file. |
| The forecast in the model doesn't match the budget the board approved | The model starts from the board-approved numbers, with a reconciliation for every change management makes. |
| A weak year, but no memo on whether it was a triggering event | A dated triggering event assessment is written against the Codification's examples, including why a conclusion of no event was reached. |
| US GAAP and IFRS give different answers on the same asset | The two tests run side by side and the difference, such as reversal rights, goes into the bridge. |

## By the numbers

| Figure | What it means | Source |
| --- | --- | --- |
| 10 years | Straight-line goodwill amortization period, or less, under the private company alternative (ASC 350-20-35-63) | [storage.fasb.org/ASU%202021-03.pdf](https://storage.fasb.org/ASU%202021-03.pdf) (2021-03-01) |
| Annual | IAS 36 test frequency for goodwill acquired in a business combination, with no reversal of a goodwill loss | [ifrs.org/issued-standards/list-of-standards/ias-36-impairment-of-assets](https://www.ifrs.org/issued-standards/list-of-standards/ias-36-impairment-of-assets/) (2026-10-16) |

## Glossary

- **Reporting unit**: An operating segment or one level below it, the level at which goodwill is tested under ASC 350.

- **Cash-generating unit**: The smallest group of assets that generates cash inflows largely independent of other assets, the IAS 36 level of testing.

- **Recoverable amount**: Under IAS 36, the higher of fair value less costs of disposal and value in use.

- **Triggering event**: A change in circumstances that makes it more likely than not that fair value is below carrying amount.

- **Asset group**: The lowest level at which identifiable cash flows are largely independent, used for the ASC 360 test.

- **Headroom**: The amount by which a unit's fair value exceeds its carrying amount, the cushion before an impairment arises.

## Frequently asked questions: Goodwill and long-lived asset impairment testing under ASC 350, ASC 360 and IAS 36

**Q: Do private companies have to test goodwill for impairment every year?**

A: Under ASC 350-20-35-28 a private company tests annually unless it elects the alternative that amortizes goodwill and tests only when a triggering event occurs. ASU 2021-03 lets it evaluate triggering events as of each reporting date. IAS 36 requires an annual test for acquired goodwill in every case. Checked 2026-10-16.

**Q: How is goodwill impairment different under IFRS and US GAAP?**

A: IAS 36 tests the cash-generating unit against recoverable amount and writes goodwill down first. US GAAP compares the reporting unit's fair value with its carrying amount and caps the loss at goodwill (ASU 2017-04). Neither allows a goodwill loss to reverse, but IAS 36 allows other asset losses to reverse and ASC 360 doesn't.

**Q: Can a private company amortize goodwill?**

A: Yes, over 10 years or less on a straight-line basis, under the Private Company Council alternative in ASC 350-20-35-63. The election covers the whole company and has no IFRS counterpart. ASU 2021-03 (March 2021) separately lets a private company evaluate triggering events only as of each reporting date, interim or annual.

**Q: How do I know whether I have a triggering event this year?**

A: Walk the examples in ASC 350-20-35-3C and the ASC 360 indicators against the year: market, costs, cash flows, management and customer changes, litigation. Document the answer as of the reporting date. A company that elected the ASU 2021-03 alternative does this as of each reporting date, interim or annual, instead of monitoring through the period.

**Q: Do you value our reporting units?**

A: Not as a valuation provider. Finbryn builds the model shell and runs management's forecast, discount rate and market inputs through it, so the fair value is management's estimate, the one valuation the test needs since ASU 2017-04 (January 2017). Finbryn issues no valuation opinion or report; where the auditor expects one, the company engages a specialist.

**Q: Where does a goodwill impairment appear in the financial statements?**

A: As a charge in the period recognized, with disclosure of the amount and method. Under IFRS 18, from annual periods beginning on or after 1 January 2027, the loss sits in the operating category of the statement of profit or loss.

Related services:
- [Purchase accounting and purchase price allocation under ASC 805 and IFRS 3](https://finbryn.com/us/services/technical-accounting-advisory/purchase-accounting-ppa-asc-805-ifrs-3)
- [Capitalized software development costs under ASC 350-40 and ASU 2025-06](https://finbryn.com/us/services/technical-accounting-advisory/capitalized-software-asc-350-40)
- [Fixed asset accounting and depreciation schedules](https://finbryn.com/us/services/accounting-services/fixed-asset-accounting-depreciation-schedules)
- [Consolidations](https://finbryn.com/us/services/month-end-close-reporting/consolidations)
- [Financial statement preparation](https://finbryn.com/us/services/accounting-services/financial-statement-preparation)

Industries:
- [Manufacturing](https://finbryn.com/us/industries/manufacturing)
- [Professional services](https://finbryn.com/us/industries/professional-services)

Related guides:
- [US GAAP vs IFRS: Key Differences for US Companies](https://finbryn.com/us/guides/us-gaap-vs-ifrs-key-differences)

## Sources

1. [IFRS Foundation, IAS 36 Impairment of Assets](https://www.ifrs.org/issued-standards/list-of-standards/ias-36-impairment-of-assets/) (2026-10-16)
2. [FASB, ASU 2017-04: Simplifying the Test for Goodwill Impairment (text of ASC 350-20-35-3C, 35-28, 35-31)](https://storage.fasb.org/ASU2017-04.pdf) (2026-10-16)
3. [FASB, ASU 2021-03: Accounting Alternative for Evaluating Triggering Events (text of ASC 350-20-35-62 to 35-66)](https://storage.fasb.org/ASU%202021-03.pdf) (2026-10-16)
4. [FASB, ASU 2014-18: Accounting for Identifiable Intangible Assets in a Business Combination](https://storage.fasb.org/ASU%202014-18.pdf) (2026-10-16)
5. [FASB, Statement 144: Accounting for the Impairment or Disposal of Long-Lived Assets (codified in ASC 360-10)](https://storage.fasb.org/aop_fas144.pdf) (2026-10-16)
6. [IFRS Foundation, IFRS 18 Presentation and Disclosure in Financial Statements (project summary)](https://www.ifrs.org/content/dam/ifrs/project/primary-financial-statements/ifrs-standard/projectsummary-ifrs18-april2024.pdf) (2026-10-16)
7. [FASB Accounting Standards Codification, Topic 350 Intangibles: Goodwill and Other](https://asc.fasb.org/350/tableOfContent) (2026-10-16)
8. [FASB, ASU 2019-10: Effective Dates (defers ASU 2017-04 for all other entities)](https://storage.fasb.org/ASU%202019-10.pdf) (2026-10-16)

Reviewed October 2026

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