Goodwill Impairment Testing is a Two-Step Process 

Step I - Test for Potential Impairment 

• Compares fair value of reporting unit with its carrying amount (accounting value).
  
  

• If fair value of reporting unit is greater than its carrying amount (including recorded goodwill), then no impairment… no need to perform Step II.
  
  

• If the reporting unit carrying amount (including recorded goodwill) is greater than its fair value, then must complete Step II to measure the amount of impairment, if any.

Step II - Measuring the amount of impairment loss 

• This step compares the implied fair value at goodwill of the reporting unit with the carrying amount of that goodwill.
  Note 13 of SFAS 142 states "The fair value of goodwill can be measured only as a residual and cannot be measured directly. Therefore, this Statement includes a methodology to determine an amount that achieves a reasonable estimate of the value of goodwill for purposes of measuring an impairment loss. That estimate is referred to herein as the implied value of goodwill". 
  
  

• The implied fair market value of goodwill shall be determined in the same manner as the amount of goodwill recognized in a business combination is determined.
  
  

• In order to determine the implied fair value of the goodwill, all assets must be valued.
  
  

• Assets subject to testing under SFAS 121 must be tested before goodwill can be tested under SFAS 142.
  
  

• If the carrying amount of a reporting unit goodwill exceed the implied fair value of that goodwill, then an impairment loss must be recognized for an amount equal to that excess.
  
  

• The impairment loss cannot exceed the carrying amount of the goodwill. Only the value of goodwill is adjusted through this process.
  
  

• The adjusted carrying amount of goodwill will be its new accounting basis.
  
  

• Goodwill can not be increased to its original carrying amount in the future. Once written down, it stays down.
  See Paragraph(s) 19 - 22 of SFAS 142.

Statement 142 also adds to disclosures previously required, including requirements to disclose information about the changes in the carrying value of goodwill from period to period, the carrying amount of intangible assets by major intangible asset class for those subject to amortization and those not subject to amortization, and the estimated amortization expense related to intangible assets for the next five years.