We test goodwill for possible impairment on an annual basis in our fourth
quarter and at any other time if events occur or circumstances indicate that the
carrying amount of goodwill may not be recoverable. Circumstances that could
trigger an impairment test include, but are not limited to: a significant
adverse change in the business climate or legal factors; an adverse action or
assessment by a regulator; change in customer, target market and strategy;
unanticipated competition; loss of key personnel; or the likelihood that a
reporting unit or significant portion of a reporting unit will be sold or
To simplify testing goodwill for impairment, the authoritative guidance
allows an entity to first assess qualitative factors to determine whether it is
necessary to perform the two-step quantitative goodwill impairment test. If an
entity determines that as a result of the qualitative assessment that it is more
likely than not (i.e. >50% likelihood) that the fair value of a reporting unit
is less than its carrying amount, then the quantitative test is required.
Otherwise, no further testing is required.
Application of the goodwill impairment test requires judgments, including: identification of the reporting units; assigning assets and liabilities to reporting units; assigning goodwill to reporting units; a
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qualitative assessment to determine whether there are any impairment indicators; determining the fair value of each reporting unit; forecasting of future operating results used in the preparation of the estimated future cash flows, including forecasted revenues and costs, timing of overall market growth and our percentage of that market, discount rates and growth rates in terminal values. We base our estimates on historical experience and on various assumptions about the future that we believe are reasonable based on available information. Unanticipated events and circumstances may occur that affect the accuracy of our assumptions, estimates and judgments. For example, if the price of our common stock were to significantly decrease combined with other adverse changes in market conditions, thus indicating that the underlying fair value of our reporting units may have decreased, we might be required to reassess the value of our goodwill in the period such circumstances were identified.
Long-lived Asset Valuation (Property, Plant and Equipment and Intangible Assets)
Long-lived assets held and used
We test long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amounts may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.