Frequently
Asked Questions
Can management conduct
the impairment testing internally?
Yes,
if company personnel can meet the criteria of SFAS 73
for relying on experts. Your auditors will be reviewing
your qualifications and your work product to ensure that
it meets the requirements of SFAS 141 and 142.
Review
our section on appraiser qualifications for financial
reporting valuations to see if your internal staff can
qualify.
Where can I obtain
copies of SFAS 141 and 142?
Copies of SFAS 141 and 142 can
be obtained directly from The Financial Accounting
Standards Board at (800) 748-0659 -
Weekdays 9:00 a.m. to 5:00 p.m. EST.
The cost is $12.75 for each SFAS.
Visit the FASB’s Website at www.fasb.org for
more information.
Can
my auditor perform the impairment testing for our
financial statement reporting?
Most
auditors are interpreting the new independence standards
as not allowing the auditor to perform these services.
Auditors will be assisting their clients in
qualifying appraisers to provide SFAS 141 and 142
related services.
(e.g. Purchase Price Allocations and Goodwill Impairment
Testing).
Will the SEC look for
companies overvaluing non-amortizable intangible assets?
Yes,
the SEC is concerned that the assets are recorded at
their fair value on the financial statements.
We can probably safely assume they will place the
same level of emphasis on non-amortizable assets as they
have on the values of In-Process Research and
Development.
Company
management should be concerned that overvaluation of
non-amortizable assets increases the potential of
realizing impairment on these assets.
If impairment is tested for and often found investors
may begin to question management’s ability to make
successful acquisitions.
What kind of practical
advice can you provide companies facing implementing
SFAS 141 and 142?
We would recommend
the company to quickly:
- Analyze any
necessary chart of account adjustments that may be
needed to effectively provide the information necessary for
goodwill impairment testing.
- Clarify
management’s role in data gathering.
- Get the auditors
involved as soon as possible.
- Get the appraisers
selected and involved as soon as possible.
- Clearly define the
scope of the engagement and the responsibilities
and expectations of each of the involved parties
(company management, auditors and appraisers).
- Do not wait until
deadlines (financial statements due dates) are
imminent and the appraisers request higher fees
because of the time pressures.
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