Goodwill Impairment Training for Accountants: Build ASC 350 Testing and Documentation Competence

By Vincent Howard, CPA | Managing Partner, Howard, Howard and Hodges | SkillAbility for Accounting Firms

Last updated: September 2, 2026  |  34-minute read

What Is Goodwill Impairment Training for Accountants?

Goodwill impairment training develops an accountant’s ability to identify when and where goodwill must be tested, connect the reporting unit’s carrying amount to a supportable fair value measurement, calculate any impairment, and document the judgment trail from business performance to financial statement disclosure.

Under the general ASC 350-20 goodwill model, goodwill is not amortized. Instead, it is tested for impairment at least annually at the reporting-unit level and between annual tests when triggering events indicate that the fair value of a reporting unit may have fallen below its carrying amount.

The difficult part is everything that comes before the subtraction.

• What is the reporting unit?
• Where is goodwill assigned?
• Did a triggering event occur?
• Do other assets require impairment testing first?
• Which assets and liabilities belong in carrying amount?
• How was fair value measured?
• Are forecasts consistent with budgets and actual performance?
• Does market capitalization contradict the valuation?
• Do tax effects alter the measured impairment?

This article connects directly to Business Combination Accounting Training for Staff Accountants, Fair Value Accounting Training for Staff Accountants, Income Tax Provision Training for Staff Accountants, Equity Accounting Training for Staff Accountants, and Workpaper Review Checklist.

Why Goodwill Impairment Is a Judgment-Development Topic

I have practiced public accounting since 1990, founded my accounting firm in 1993, and helped grow Howard, Howard and Hodges from three people to approximately 50 staff. Since 2020, I have built SkillAbility around a recurring development issue: staff are often asked to update the impairment workbook without being taught how the reporting unit, budget, valuation, and accounting conclusions fit together.

A DCF can calculate present value. It cannot decide whether the company identified its reporting units correctly, goodwill was assigned correctly, an adverse event requires interim testing, another asset should be impaired before goodwill, management’s forecast is market-participant consistent, or a private-company accounting alternative is actually elected.

“The valuation specialist says there is 12% headroom” is not the entire file. “The reporting unit is appropriate, all relevant impairment tests were completed in sequence, carrying amount ties, fair value is supportable, assumptions reconcile to internal and external evidence, and 12% headroom remains after sensitivity analysis” is much closer to review-ready.

What Is Current in Goodwill Impairment Accounting in 2026?

Deloitte’s current comprehensive Goodwill and Intangible Assets Roadmap is dated September 2025 and remains its current ASC 350-20/350-30 roadmap in 2026. KPMG’s current Impairment of Nonfinancial Assets Handbook is also dated September 2025 and covers goodwill, indefinite-lived intangible assets, and ASC 360 long-lived assets together because the impairment-testing sequence matters.

The current goodwill model has not been replaced in 2026.

Chart: Where Goodwill Impairment Judgment Concentrates

SkillAbility training heat map—not a FASB ranking. Actual risk depends on acquisitions, reporting structure, market conditions, reporting-unit headroom, valuation complexity, tax basis, private-company elections, disposals, and reorganizations.

The GOODWILL READY Framework

G — Identify Reporting Units Before Testing Goodwill

Goodwill is tested at the reporting-unit level under the general ASC 350 model.

A reporting unit is an operating segment or one level below an operating segment, often called a component. That means the impairment unit is not automatically:

• the legal entity,
• the acquired company,
• the consolidated company,
• or the reportable segment shown in the annual report.

The reporting-unit analysis begins with operating segments under ASC 280 and then considers whether components below the operating-segment level should be treated separately or aggregated when the criteria are met.

Why this matters

Suppose a company operates one reportable segment called Professional Services, but internally the CODM receives discrete financial information for three economically different operating components:

• Healthcare consulting
• Technology implementation
• Managed services

If goodwill from acquisitions has been assigned across these components, testing only the consolidated reportable segment could hide impairment in one weaker component behind stronger performance in another.

Reporting-unit memo

Staff should document:

• operating segments,
• components one level below,
• availability of discrete financial information,
• management oversight,
• economic similarity considerations,
• final reporting units,
• goodwill assigned to each.

Goodwill assignment is part of the control

Goodwill arising from a business combination is assigned to the reporting units expected to benefit from the synergies of the combination.

That assignment should be supportable and consistent with how management actually expects the acquired business to benefit the company.

Connect this directly to Business Combination Accounting Training for Staff Accountants, because the quality of the initial goodwill assignment determines the quality of later impairment testing.

O — Annual Testing and Interim Triggering Events

Annual test date

Under the general goodwill model, each reporting unit containing goodwill is tested at least annually.

The annual test may occur at any time during the fiscal year as long as it is performed consistently at the same time each year for that reporting unit.

Different reporting units can have different annual test dates.

Interim triggering events

Annual testing is not a safe harbor until next year.

Goodwill must also be evaluated between annual testing dates when events or changes in circumstances indicate that it is more likely than not that a reporting unit’s fair value has fallen below its carrying amount.

Common triggering-event categories

Trigger monitoring should be continuous

For entities under the general model, staff should not wait for the annual impairment memo to ask whether adverse conditions arose eight months earlier.

Build a quarterly trigger checklist that connects:

• budget-to-actual results,
• rolling forecasts,
• customer churn,
• margin deterioration,
• interest rates,
• market multiples,
• market capitalization,
• restructuring plans,
• acquisition performance.

D — The Optional Qualitative Assessment: Step 0

ASC 350 allows an entity to first perform a qualitative assessment to determine whether it is more likely than not—more than 50% that the fair value of a reporting unit is less than its carrying amount.

If the conclusion is not more likely than not, the quantitative test is unnecessary.

If the conclusion is more likely than not, the entity proceeds to the quantitative test.

An entity may also skip Step 0 and go directly to the quantitative test.

Step 0 is not “nothing bad happened”

A robust qualitative memo should identify the inputs and assumptions that matter most to fair value and carrying amount.

Examples:

• Revenue growth
• EBITDA margins
• customer retention
• capital expenditure
• working capital
• discount rate
• terminal growth
• peer multiples
• reporting-unit debt
• carrying-value changes

Weight evidence

Staff should classify evidence as:

• Positive
• Neutral
• Adverse

and weight the factors based on how strongly they affect fair value or carrying amount.

Prior headroom matters

A reporting unit that had 45% fair-value headroom in a recent quantitative test may support a different Step 0 conclusion than one that had only 4% headroom.

But prior headroom is not permanent protection.

If:

• the discount rate rose sharply,
• forecast EBITDA fell,
• peer multiples compressed,
• or a major customer was lost,

the prior cushion can disappear quickly.

Useful Step 0 structure

W — Test Other Assets Before Goodwill When Multiple Impairment Models Are Triggered

The order of impairment testing matters because the goodwill quantitative test compares reporting-unit fair value with the reporting unit’s carrying amount.

If another asset should have been written down first, the carrying amount used in the goodwill test is wrong.

General sequence concept

When impairment indicators affect several assets at the same time, an entity generally adjusts smaller units of account under their applicable guidance before testing the larger goodwill reporting unit.

Examples of assets tested before goodwill

• Accounts receivable / credit losses
• Inventory
• indefinite-lived trademarks or trade names
• finite-lived intangible assets within ASC 360 asset groups
• PP&E
• right-of-use assets where applicable guidance requires adjustment

Example

A reporting unit has:

• $5M goodwill
• $4M finite-lived customer relationships
• $7M PP&E
• other net assets

A severe customer loss triggers both ASC 360 and ASC 350 testing.

If the asset group containing the customer relationship and PP&E requires a $2M impairment under ASC 360, that adjustment reduces the reporting-unit carrying amount before goodwill is tested.

O + L — Build the Reporting-Unit Carrying Amount Correctly

The quantitative test is only as good as the carrying amount it compares with fair value.

Common carrying-amount components

• Working capital
• PP&E
• finite-lived intangibles
• indefinite-lived intangibles
• right-of-use assets and related lease balances, as appropriate
• debt or other liabilities assigned to the reporting unit
• deferred tax assets and liabilities
• goodwill
• other assets/liabilities that would be included in a market-participant sale of the reporting unit

Working capital should match the valuation premise

If the DCF assumes the reporting unit would transfer with a normal level of working capital, the carrying-value calculation should not exclude receivables, inventory, or payables simply because they are managed centrally.

Corporate assets

Not every corporate asset belongs in every reporting unit.

Staff should determine whether an asset:

• relates to the operations of the reporting unit,
• would transfer if the unit were sold,
• is used in the unit’s fair-value model.

Deferred taxes are not optional

ASC 350 requires deferred income taxes to be included in the reporting unit carrying amount regardless of whether fair value is measured assuming a taxable or nontaxable transaction.

I — Measure Reporting-Unit Fair Value Under ASC 820

The fair value of a reporting unit is measured using ASC 820’s market-participant exit-price framework.

For many operating businesses, valuation techniques include:

• Discounted cash flow / income approach
• Guideline public company multiples
• Precedent transaction multiples
• Other market evidence

Multiple approaches can be used and reconciled.

Staff do not need to be valuation specialists—but they need to understand the bridge

For a DCF, staff should understand:

• forecast period,
• revenue growth,
• EBITDA / operating margin,
• capital expenditures,
• working capital needs,
• tax assumptions,
• terminal value,
• discount rate,
• market-participant adjustments.

Forecast consistency

The impairment forecast should be reconciled to:

• board-approved budgets,
• strategic plans,
• actual results,
• debt covenant forecasts,
• purchase-accounting forecasts,
• tax forecasts,
• other financial reporting estimates.

Differences can be appropriate, but they should be explained.

Market approach

If the valuation uses peer multiples, staff should understand:

• why the selected companies are comparable,
• what metric is used,
• whether the multiple is enterprise or equity value based,
• how growth and margin differences are considered,
• whether a control premium is embedded.

See Fair Value Accounting Training for Staff Accountants for the ASC 820 framework.

L — Reconcile Reporting-Unit Fair Value to Market Capitalization

For a public company, the sum of reporting-unit fair values should make sense relative to the company’s observable market capitalization and other enterprise-value evidence.

This does not mean:

automatically.

Differences can arise from:

• control premiums,
• corporate assets and liabilities,
• nonoperating items,
• debt and cash,
• tax attributes,
• market-participant expectations,
• short-term market volatility.

Implied control premium

If the aggregate equity value implied by the reporting-unit valuations is $600M while observable market capitalization is $420M, the implied premium is significant.

That is not automatically wrong.

But it demands evidence.

Staff should compare:

• historical control-premium data,
• industry transactions,
• recent stock-price movements,
• analyst expectations,
• reporting-unit forecasts.

Private companies need external corroboration too

Private entities do not have observable market capitalization, but they can still challenge fair value using:

• recent financing transactions,
• third-party offers,
• industry multiples,
• comparable transactions,
• debt capacity,
• recent acquisitions or equity transactions.

R — Run the Quantitative Goodwill Impairment Test

The current U.S. GAAP quantitative goodwill impairment test compares reporting-unit fair value with reporting-unit carrying amount, including goodwill.

No impairment

If fair value exceeds carrying amount:

Impairment

If carrying amount exceeds fair value:

The old Step 2 model is gone

Current ASC 350 no longer requires an entity to calculate the implied fair value of goodwill through a hypothetical purchase-price allocation when Step 1 indicates impairment.

That old second step was eliminated and is no longer part of current U.S. GAAP.

Example: impairment below goodwill balance

A reporting unit has:

• Carrying amount: $25M
• Fair value: $22M
• Goodwill: $6M

Goodwill falls from $6M to $3M.

Example: excess exceeds goodwill

A different reporting unit has:

• Carrying amount: $25M
• Fair value: $15M
• Goodwill: $6M

The difference is $10M, but ASC 350 impairment is limited to the goodwill balance.

The remaining $4M shortfall does not get allocated automatically to PP&E or other assets through the goodwill test. Other assets follow their own impairment guidance and should already have been considered in the required sequence.

E — Deferred Taxes and Tax-Deductible Goodwill Can Change the Calculation

Tax is one of the most easily missed ASC 350 workstreams.

Deferred taxes in carrying amount

Deferred tax assets and liabilities assigned to the reporting unit are included in its carrying amount.

That is true regardless of whether the fair value model assumes the reporting unit would be sold in a taxable or nontaxable transaction.

Tax-deductible goodwill

When goodwill is deductible for tax purposes, the relationship between:

• book goodwill,
• tax basis in goodwill,
• deferred taxes,
• the impairment loss

can require additional calculations under ASC 350 and ASC 740.

Do not calculate:

and assume the tax work is finished.

Training handoff

The impairment team and tax-provision team should reconcile:

• reporting-unit DTA/DTL balances,
• tax basis of goodwill,
• deductibility of book impairment,
• deferred-tax changes,
• effective-tax-rate effects.

See Income Tax Provision Training for Staff Accountants.

A — Private-Company and Not-for-Profit Goodwill Alternatives

Eligible private companies and not-for-profit entities can elect goodwill accounting alternatives that substantially change the recurring workload.

Goodwill amortization alternative

An eligible entity can elect to amortize goodwill on a straight-line basis over 10 years, or over a shorter period if it can demonstrate that a shorter useful life is more appropriate.

Under this alternative, goodwill is generally tested for impairment when a triggering event occurs rather than through mandatory annual impairment testing.

Entity-level or reporting-unit-level testing

The accounting alternative can also simplify the level at which goodwill is tested, subject to the entity’s election and the applicable guidance.

Triggering-event evaluation alternative

Eligible entities may separately elect an alternative that allows goodwill impairment triggering events to be evaluated only as of the end of each reporting period rather than continuously during the reporting period.

Example

A private company acquires a business and recognizes $2.4M of goodwill.

It elects the goodwill amortization alternative and uses the default 10-year life.

If a triggering event occurs in Year 3, the remaining amortized goodwill is tested under the private-company impairment model.

D + Y — Reporting-Unit Reorganizations, Disposals, and Goodwill Reassignment

Goodwill cannot remain attached to an obsolete org chart.

Reporting structure changes

If an entity reorganizes its reporting structure and changes the composition of reporting units, assets and liabilities must be reassigned appropriately and goodwill is generally reassigned using a relative fair value approach.

Example

Reporting Unit A contains $9M of goodwill.

After a restructuring, its operations are split into new reporting units B and C.

Assume the portions transferred have relative fair values:

• B: 60%
• C: 40%

The exact analysis depends on the facts, but the principle is that goodwill should follow the relative fair value of the business portions affected by the reorganization.

Reorganizations can mask impairment

Before or around a major reporting-unit reorganization, management should consider whether impairment exists in the old structure.

Otherwise, a weak reporting unit could be combined with a stronger business and its economic deterioration could become less visible.

Disposals

When a portion of a reporting unit that constitutes a business is disposed of, a portion of reporting-unit goodwill is generally included in the carrying amount of the business disposed of based on relative fair values, subject to the detailed disposal guidance.

Staff should therefore connect:

Worked Example: From Triggering Event to Impairment Entry

Assume a company has a reporting unit called Managed Services.

Background

• Goodwill: $4.0M
• Other net assets, after completing applicable impairment tests: $10.5M
• Total reporting-unit carrying amount: $14.5M
• Annual impairment test date: October 1

In July, the reporting unit loses a major customer representing 18% of revenue.

Management revises:

• Year-1 revenue down 12%
• Year-1 EBITDA margin from 20% to 16%
• long-term growth from 3.0% to 2.5%
• discount rate from 10.0% to 11.5%

Step 1 — triggering event

The customer loss and forecast deterioration create adverse reporting-unit-specific and financial-performance evidence.

Management concludes testing is required before the normal October annual date.

Step 2 — other assets first

Staff evaluates receivables, indefinite-lived intangible assets, and long-lived assets under applicable guidance.

Assume a separate long-lived asset impairment reduces net assets by $500,000 before the goodwill test. The $14.5M carrying amount above reflects that adjustment.

Step 3 — reporting-unit fair value

A valuation specialist applies:

• DCF income approach,
• guideline public-company multiple approach.

The reconciled reporting-unit fair value is:

Step 4 — quantitative goodwill test

Because $1.7M is less than the $4.0M goodwill balance, the full $1.7M is recognized.

Entry

• Dr. Goodwill Impairment Loss $1.7M
• Cr. Goodwill $1.7M

Remaining goodwill:

Step 5 — tax and disclosure

Staff then completes:

• tax-deductibility / DTA-DTL analysis,
• impairment expense tie-out,
• remaining-goodwill rollforward,
• required disclosure support.

Change one fact

If fair value were $14.0M instead:

If fair value were $15.2M:

That last scenario is not “safe.” It has only 4.8% headroom and should be highlighted for sensitivity and future trigger monitoring.

Sensitivity, Headroom, and Back-Testing

A binary pass/fail conclusion can hide risk.

Calculate headroom

Example:

• Fair value: $15.2M
• Carrying amount: $14.5M

That reporting unit passed the test, but it is highly sensitive to small valuation changes.

Run sensitivities around the assumptions that matter

Back-test forecasts

Compare prior impairment-test forecasts with actual results.

If management repeatedly misses:

• revenue,
• margin,
• cash flow,
• customer retention,

the next valuation should consider whether forecast bias exists.

Document reporting units with low headroom

A useful watch list includes:

• Current headroom
• prior headroom
• key sensitivity
• next test date
• current trigger status
• management action / monitoring owner

Annual / Triggering-Event Goodwill Impairment Workflow

ASC 350 Self-Review Checklist Before Manager Review

• Did I confirm which goodwill accounting model the entity applies?
• Did I identify whether the entity is eligible for a private-company or NFP alternative?
• Did I confirm whether goodwill is amortized under an elected alternative?
• Did I confirm the entity’s annual goodwill impairment testing date?
• Did I verify that no more than 12 months elapse between annual tests under the general model?
• Did I identify all operating segments?
• Did I identify components one level below operating segments?
• Did I distinguish reporting units from reportable segments?
• Did I document aggregation of components where applicable?
• Did I reconcile the reporting-unit structure to current management reporting?
• Did I assess whether reorganizations changed reporting units?
• Did I identify all goodwill balances by acquisition?
• Did I reconcile total goodwill to the GL?
• Did I assign goodwill to the reporting units expected to benefit from acquisition synergies?
• Did I review changes in goodwill allocation from prior periods?
• Did I identify any business disposals requiring goodwill allocation?
• Did I use or review relative fair value when goodwill was reassigned because of a reorganization/disposal?
• Did I monitor macroeconomic triggering events?
• Did I monitor interest-rate and capital-market changes?
• Did I monitor industry and competitive deterioration?
• Did I monitor cost inflation / margin pressure?
• Did I compare actual revenue and earnings with prior forecasts?
• Did I identify negative or declining cash flows?
• Did I identify major customer or supplier losses?
• Did I identify restructurings, litigation, regulatory changes, or management changes?
• Did I identify planned sales or partial disposals of reporting units?
• For public companies, did I evaluate sustained share-price decline and market capitalization?
• If a triggering event occurred, did I evaluate the appropriate measurement date?
• If I performed Step 0, did I document the more-likely-than-not threshold?
• Did I identify the reporting unit’s key fair-value drivers?
• Did I weight positive and negative qualitative evidence?
• Did I avoid treating one positive factor as an automatic override of several significant adverse factors?
• Did I consider prior quantitative-test headroom?
• Did I update prior headroom for significant current events?
• Did I document why the quantitative test is or is not required?
• If the qualitative assessment was bypassed, did I document the election to proceed directly to quantitative testing?
• Did I identify all other assets subject to impairment at the same time?
• Did I test receivables / credit-loss balances under applicable guidance first?
• Did I test inventory where applicable?
• Did I test indefinite-lived intangible assets under ASC 350-30 before goodwill?
• Did I test long-lived asset groups under ASC 360 before goodwill?
• Did I reflect any resulting impairments in the reporting-unit carrying amount?
• Did I tie reporting-unit working capital to the valuation premise?
• Did I assign PP&E and intangible assets consistently with operations and valuation?
• Did I assign appropriate corporate assets/liabilities?
• Did I include deferred tax assets and liabilities in carrying amount?
• Did I reconcile reporting-unit carrying amount to the GL?
• Did I reconcile the enterprise/equity valuation premise to the carrying-value premise?
• Did I identify the valuation techniques used?
• Did I document why the income / market approaches are appropriate?
• Did I reconcile valuation forecasts to board-approved budgets?
• Did I reconcile valuation forecasts to actual recent results?
• Did I compare current forecasts with forecasts used in prior impairment tests?
• Did I back-test prior forecasts for systematic optimism or conservatism?
• Did I evaluate revenue growth assumptions?
• Did I evaluate margin assumptions?
• Did I evaluate capital expenditure and working-capital assumptions?
• Did I evaluate terminal growth assumptions?
• Did I evaluate the discount rate and changes from prior period?
• Did I evaluate guideline public companies and comparability?
• Did I evaluate market multiples and changes from prior period?
• Did I identify buyer-specific synergies that should not be embedded as market-participant assumptions?
• Did I reconcile aggregate reporting-unit values to market capitalization where applicable?
• Did I calculate the implied control premium where useful?
• Did I explain significant differences between market capitalization and valuation?
• For private companies, did I compare fair value with recent transactions, offers, financings, or market evidence where available?
• Did I calculate reporting-unit headroom?
• Did I perform sensitivity analysis for low-headroom reporting units?
• Did I identify which assumptions can eliminate headroom?
• Did I compare fair value with carrying amount including goodwill?
• Did I measure impairment as carrying amount less fair value?
• Did I limit recognized impairment to the reporting-unit goodwill balance?
• Did I avoid using the obsolete Step 2 implied-goodwill model?
• Did I understand tax basis in goodwill?
• Did I evaluate tax-deductible goodwill implications?
• Did I reconcile impairment-related deferred tax effects with ASC 740?
• Did I calculate remaining goodwill after impairment?
• Did I tie impairment expense to the income statement?
• Did I tie remaining goodwill to the balance sheet?
• Did I update goodwill rollforward disclosures?
• Did I prepare disclosure of material impairment facts and circumstances?
• Did I document changes in valuation techniques and assumptions?
• Did I identify reporting units at risk of future impairment?
• Did I update the trigger-monitoring watch list?
• Can another accountant reproduce the reporting-unit, carrying-value, fair-value, impairment, tax, and disclosure conclusions from my workpapers?

100-Point Goodwill Impairment Readiness Scorecard

Suggested readiness bands

• 90–100: Ready to own defined goodwill impairment workstreams with normal manager, valuation, and tax review.
• 82–89: Generally review-ready; targeted coaching remains in reporting units, fair-value challenge, or tax.
• 72–81: Controlled ownership with manager checkpoints before Step 0, valuation, and impairment conclusions.
• Below 72: Continue structured ASC 350 practice.

Override the numerical score for intentionally delayed trigger recognition, manipulated reporting-unit aggregation, unsupported forecasts, concealed market-cap contradictions, fabricated valuation evidence, or impairment plugs.

A 30/60/90-Day Goodwill Impairment Training Plan

15 Realistic Goodwill Impairment Training Scenarios

1. One reportable segment, three reporting units

Staff assumes goodwill can be tested at the reportable-segment level. Management reporting shows economically different components one level below. Staff performs the reporting-unit analysis first.

2. Annual test passed two months ago

A major customer representing 20% of revenue is lost after the annual test. Staff recognizes that the annual test does not eliminate interim trigger monitoring.

3. Step 0 says “economy stable”

The generic macro environment is stable, but reporting-unit revenue is 15% below plan and prior headroom was only 5%. Staff weights reporting-unit-specific evidence more heavily.

4. Long-lived asset impairment skipped

Goodwill is tested first during a severe business decline. Staff reverses the sequence and tests applicable asset groups before goodwill.

5. Deferred tax liabilities excluded

The reporting-unit carrying amount omits DTLs even though the valuation premise includes the related assets. Staff adds deferred taxes as required.

6. Valuation forecast is better than the board budget

Management uses a higher-growth goodwill forecast than its approved operating plan. Staff requires a supportable market-participant reconciliation.

7. Market cap implies a 70% control premium

Reporting-unit fair values sum far above the company’s observable market value. Staff does not automatically reject the valuation, but requires robust support.

8. Reporting unit has 3% headroom

The test passes. Staff still runs discount-rate and EBITDA sensitivity and places the unit on the recurring trigger watch list.

9. $12M shortfall, only $7M goodwill

Staff recognizes $7M goodwill impairment—not $12M—and confirms other assets were tested under their applicable models.

10. Private company automatically amortizes goodwill

The company never elected the accounting alternative. Staff applies the general model until an eligible election is properly adopted.

11. Private company elects 15-year goodwill life

The goodwill alternative does not permit an amortization period longer than 10 years.

12. Reporting units reorganized in Q3

Staff leaves goodwill in the old structure. Reviewer requires relative-fair-value reassignment and consideration of impairment before/around the reorganization.

13. Partial business sale excludes goodwill

The sold business represents part of a reporting unit. Staff evaluates the required goodwill allocation to the disposal using relative fair value.

14. FASB 2026 research treated as adopted GAAP

Management stops annual tests because FASB discussed trigger-only impairment. Staff documents that research-stage decisions are tentative and current ASC 350 remains applicable.

15. Specialist report is accepted without carrying-value reconciliation

Fair value is reasonable, but the company compares enterprise value to a carrying amount that omits working capital and tax balances. Staff fixes the accounting bridge.

What CPA Firms Should Measure

Connect these measures to your Staff Accountant Competency Checklist, Accounting Employee Development Plan, Scenario-Based Training for Accountants, and Accountants Shifting From Preparers to Reviewers.

Common Goodwill Impairment Training Mistakes

Mistake 1: Start with valuation before reporting units

A sophisticated DCF is prepared for the wrong impairment unit.

Mistake 2: Treat the annual test as the only test

Triggering events between annual dates are ignored.

Mistake 3: Turn Step 0 into a boilerplate checklist

Qualitative factors are listed without linking them to the reporting unit’s actual fair-value drivers.

Mistake 4: Test goodwill before other assets

The reporting-unit carrying amount is overstated because required asset-specific impairments were not recorded first.

Mistake 5: Use management forecast as market-participant forecast automatically

Internal optimism and buyer-specific synergies enter fair value without challenge.

Mistake 6: Ignore market capitalization

Reporting-unit valuations imply a large control premium with no external corroboration.

Mistake 7: Call a 2% headroom result “no issue”

The unit passes mathematically but remains highly exposed to small assumption changes.

Mistake 8: Forget deferred taxes

Carrying amount and tax-deductible goodwill effects are incomplete.

Mistake 9: Apply private-company alternatives automatically

Eligibility is confused with an actual accounting-policy election.

Mistake 10: Leave goodwill attached to the old org chart

Reorganizations and disposals occur without reassignment of goodwill.

How SkillAbility Builds Goodwill Impairment Capability

BASE — Testing architecture

• Reporting units
• goodwill allocation
• annual test date
• triggering events
• Step 0
• carrying-value tie-out

MAPS — Impairment judgment

• Testing sequence
• DCF/multiple review
• market-participant assumptions
• market-cap reconciliation
• headroom sensitivity
• deferred taxes

SUMMIT — Reviewer and model-governance readiness

• Review reporting-unit determinations
• challenge triggers and Step 0 conclusions
• coordinate valuation specialists
• review low-headroom units
• review private-company elections
• manage reorganizations/disposals
• review disclosures
• coach staff without rebuilding the impairment file

Frequently Asked Questions About Goodwill Impairment Training

What is ASC 350 goodwill impairment?

ASC 350-20 governs subsequent accounting for goodwill. Under the general model, goodwill is not amortized and is tested at least annually and between annual tests when triggering events indicate potential impairment.

At what level is goodwill tested for impairment?

Under the general model, goodwill is tested at the reporting-unit level. A reporting unit is an operating segment or one level below an operating segment.

How often is goodwill tested?

Goodwill under the general model is tested at least annually at a consistent recurring date and between annual tests when relevant triggering events occur.

What is a goodwill triggering event?

A triggering event is an event or change in circumstances that may more likely than not reduce a reporting unit’s fair value below its carrying amount. Examples include economic deterioration, lower earnings, customer losses, market-multiple declines, restructuring, or sustained share-price declines.

What is Step 0 in goodwill impairment?

Step 0 is the optional qualitative assessment used to determine whether it is more likely than not—more than 50%—that a reporting unit’s fair value is below carrying amount.

Can an entity skip the qualitative assessment?

Yes. An entity may bypass the optional qualitative assessment and proceed directly to the quantitative goodwill impairment test.

How is goodwill impairment measured?

Under the current quantitative model, impairment equals the excess of reporting-unit carrying amount over reporting-unit fair value, limited to the amount of goodwill allocated to the reporting unit.

Is the old two-step goodwill impairment test still used?

No. The former Step 2 implied-fair-value-of-goodwill calculation was eliminated. Current U.S. GAAP uses the direct carrying-amount-versus-fair-value test.

What assets are tested before goodwill?

When multiple impairment indicators arise, assets with smaller units of account—such as receivables, inventory, indefinite-lived intangibles, and long-lived asset groups—are tested under their applicable guidance before goodwill.

Are deferred taxes included in reporting-unit carrying amount?

Yes. ASC 350 requires deferred income taxes assigned to the reporting unit to be included in carrying amount regardless of whether fair value assumes a taxable or nontaxable transaction.

How is reporting-unit fair value measured?

Fair value is measured under ASC 820 using market-participant assumptions. Common techniques include discounted cash flow, guideline public-company multiples, and transaction-market evidence.

Why does market capitalization matter?

For public companies, market capitalization provides observable external evidence that should be reconciled with the aggregate fair values implied by reporting-unit valuations, including consideration of any implied control premium.

What is goodwill impairment headroom?

Headroom is the excess of reporting-unit fair value over carrying amount. Low headroom indicates that relatively small changes in forecasts, discount rates, or multiples could create impairment.

Can goodwill impairment be reversed under U.S. GAAP?

Generally, a recognized goodwill impairment loss is not subsequently reversed under U.S. GAAP.

Do private companies have to test goodwill every year?

An eligible private company that elects the goodwill amortization alternative generally amortizes goodwill and tests it for impairment upon a triggering event rather than performing mandatory annual impairment testing.

How long can a private company amortize goodwill?

Under the accounting alternative, goodwill is amortized straight-line over 10 years or a shorter period if the entity demonstrates that the shorter useful life is more appropriate.

What is the private-company triggering-event alternative?

Eligible entities may elect an accounting alternative allowing goodwill impairment triggering events to be evaluated only as of the end of each reporting period.

What happens to goodwill when reporting units are reorganized?

When a reorganization changes reporting-unit composition, goodwill is generally reassigned to affected reporting units using a relative fair value approach.

Did FASB change goodwill impairment accounting in 2026?

No final 2026 change has replaced the current ASC 350 model. In February 2026, FASB directed staff to research potential simplifications involving trigger-only testing and operating-segment-level testing, but those decisions are tentative.

How do you know when an accountant is review-ready for goodwill impairment?

A review-ready accountant can identify reporting units, monitor triggers, perform Step 0, apply the testing sequence, build carrying amount, understand fair value, challenge forecasts and market evidence, calculate impairment and tax effects, and prepare complete documentation and disclosures.

Current Research and Authority Resources

• Deloitte — Goodwill and Intangible Assets Roadmap, September 2025
• Deloitte — On the Radar: Goodwill and Intangible Assets
• KPMG — Impairment of Nonfinancial Assets Handbook, September 2025
• FASB — February 4, 2026 Goodwill Research Discussion
• Google Search Central — Optimizing for Generative AI Features
• Google Search Central — Generative AI Performance Reports

Goodwill impairment can intersect with ASC 805 business combinations, ASC 820 fair value, ASC 740 income taxes, ASC 360 long-lived assets, ASC 350-30 indefinite-lived intangible assets, ASC 280 segment reporting, ASC 326 credit losses, ASC 842 leases, restructuring/disposal guidance, and SEC reporting. Verify current authoritative literature and entity-specific facts for live tests.

The Bottom Line

Goodwill impairment training should not produce accountants who can file a valuation report.

It should produce accountants who can defend why goodwill is or is not impaired.

Identify reporting units before testing.

Keep goodwill assigned to the businesses that benefit from it.

Monitor triggering events between annual tests.

Use Step 0 as evidence weighting—not boilerplate.

Test other impaired assets before goodwill when required.

Build carrying amount to match the reporting unit and valuation premise.

Include deferred taxes.

Challenge DCF forecasts, discount rates, peer multiples, and external market evidence.

Calculate headroom and sensitivity—not just pass/fail.

Recognize impairment as carrying amount minus fair value, limited to goodwill.

Apply private-company alternatives only when properly elected.

Reassign goodwill when reporting units reorganize or businesses are disposed of.

Document what changed, why the test was required, and what could change the conclusion next period.

That is GOODWILL READY.

Protect Knowledge. Develop People. Scale the Firm.

To staff who can explain why goodwill passed or failed before review has to rebuild the analysis,

Vincent Howard, CPA
Managing Partner, Howard, Howard and Hodges
SkillAbility for Accounting Firms

© 2026 SkillAbility for Accounting Firms. This article provides general educational information and does not replace client-specific U.S. GAAP, audit, tax, valuation, legal, SEC, transaction-advisory, or other professional advice.