Statements of Financial Accounting Standards SFAS 142

Under Statement 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently, if impairment indicators arise. Goodwill is required to be tested for impairment between the annual tests if an event occurs or circumstances change that more likely than not reduce the fair value of a reporting unit below its carrying value. An indefinite lived intangible asset is required to be tested for impairment between the annual tests if an event occurs or circumstances change indicating that the asset might be impaired. Intangible assets that have finite lives will continue to be amortized over their useful lives, for which Statement 142 does not impose a limit.

Statement 142 provides a model and methodology to test for and measure goodwill impairment that is to be applied by both public and non-public companies. The two-step model provides a test for potential impairment (Step 1) and, if necessary, a measurement of the impairment (Step 2). Statement 142 also provides specific guidance to test intangible assets not being amortized for impairment, creating what is essentially a lower of cost or fair value model for these assets.