An asset that has a market price less than the value listed on a company’s balance sheet is considered impaired. Assets can develop impairment if their anticipated cash flow losses are related to the asset, there is more than a 50 percent chance the asset will be disposed before the initial disposal date, or legal factors have been significantly changed and have drastically affected the asset’s market price.
Companies are responsible for routinely assessing whether impairment indicators are present. ASC 360-10 provides general guidelines as to when an asset should be tested for impairment. One of the challenging aspects of ASC 360-10 is that it requires the use of fair value measurements for impairment of assets that are not widely traded.
- Loss of key personnel
- Loss of significant client
- Missing considerable amount of projections
- Any other meaningful event bound to negative consequences
Due to the complexities involved in valuing intangible assets, public and private companies are encouraged to seek advice from an independent valuation firm like Scalar to determine whether certain events or circumstances apply to ASC 360. Scalar’s dedicated team of specialists have experience performing thousands of analyses for the entire spectrum of valuation needs, including intangible asset impairment, and are well-equipped to provide a superior valuation result and experience.