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FASB issues ASU to simplify testing of indefinite-lived intangible assets for impairment

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27 Jul 2012

The US Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2012-02 'Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment'. The ASU simplifies the guidance for testing the decline in the realisable value (impairment) of indefinite-lived intangible assets other than goodwill.

The FASB issued ASU 2012-02 based on feedback received from stakeholders concerning the recurring costs of performing impairment tests for indefinite-lived intangible assets other than goodwill where there was a low likelihood of impairment. The amendments in the ASU allows an entity the option of first performing a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The FASB believes that the amendments made by ASU 2012-02 will reduce the cost of accounting for indefinite-lived intangible assets.

In addition, the FASB realises that the guidance in this ASU will not result in the convergence of impairments between US GAAP (Topic 350) and IFRS (IAS 36).

The ASU applies to all public, private, and not-for-profit organisations. The amendments are effective for annual and interim impairment tests performed in fiscal years beginning after 15 September 2012. Early adoption is permitted.

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