How often must indefinite-lived intangibles be tested for impairment?

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AcadiFi · Accepted Answer

Indefinite-lived intangibles (trademarks, broadcast licenses, perpetual franchise rights that continue to generate cash flows indefinitely) are NOT amortized but must be tested for impairment at least annually, plus whenever events indicate possible impairment. Under ASC 350: compare carrying amount to fair value. If carrying > fair value, recognize impairment equal to difference. An optional qualitative step-zero (similar to goodwill) is permitted. Example: Verdant Spirits owns the 'Silvermoon Rum' trademark acquired for $85M, classified as indefinite-lived. Annual test: estimate fair value using relief-from-royalty method. Projected brand revenue $180M, royalty rate 4%, royalty savings after tax $5.4M/year, WACC 10%, terminal growth 2% → fair value $65M. Impairment = $85M - $65M = $20M. New carrying = $65M. ```mermaid flowchart LR A[Indefinite
Intangible] --> B[Annual
Test Required] B --> C{Step Zero
Elected?} C -->|Yes| D[Qualitative] C -->|No| E[Compute FV] D --> F{FVLikely?} F -->|No| G[Skip] F -->|Yes| E E --> H[Impair
If Needed] ``` Reassess useful life annually — if no longer indefinite, reclassify as finite-lived and begin amortization prospectively.

How often must indefinite-lived intangibles be tested for impairment?

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