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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (55681)	7/13/2015 1:01:18 PM
From: E_K_S	Read Replies (1) \| Respond to of 78648

Re: impaired intangible assets & Goodwill Goodwill and Intangible Asset Impairment After initial recognition, goodwill and indefinite lived intangible assets are periodically tested for impairment under ASC Topic 350. Such impairment tests are the result of ASC Topic 805's prohibition of pooling of interests and the elimination of goodwill amortization. When testing an indefinite-lived intangible asset for impairment, an entity may first apply the optional qualitative impairment assessment. If, on the basis of the qualitative impairment assessment, an entity asserts that it is more likely than not that the indefinite-lived intangible asset is impaired, an entity would be required to calculate the fair value of the asset for an impairment test. The fair value of the asset is compared with its carrying amount. An impairment loss is recognized for the amount by which the carrying amount exceeds the fair value. Reversal of impairment loss is not permitted. ---------------------------------------------------------- It looks as the impairment test is subjective and usually tested annually, so every company may treat this differently. For my back-of-the-envelope valuation, I can just count a % of the BV in the Graham No. calculation. This does two things; (1) it gives a sense of importance to the value calculation and (2) can be adjusted based on the amount of Goodwill that overstates BV. Several analysts do a similar adjustment when looking at current year R&D expenses. Rather than expensive 100% against the current earnings, they will amortize these amounts (as intangible assets) over 5 years (or less). EPS will now reflect 'true' EPS if/when that R&D pans out. This is more the case for high tech companies and I have read about analysts doing this when trying to value INTC. CBI & their goodwill is sort of the opposite case. It probably is a good exercise to see if management makes some type of impairment write down each year or if that is just done periodically. EKS