Long-lived intangible assets are expected to provide economic benefits over a period typically greater than a year. These assets can include:
- Unpatented technology
- Proprietary software
- Copyrights and trademarks
- Customer-related intangible assets such as customer relationships, customer contracts and customer lists
Intangibles & Goodwill (ASC 805)
Long-lived intangible assets are recognized separately from goodwill in a business combination under Accounting Standards Codification 805 (ASC 805) if they meet either the separability or the contractual-legal criterion. If an acquisition of assets does not meet the definition of a business under ASC 805, the purchase cost of that asset group is allocated on a relative fair value basis pursuant to ASC 350, and the transaction does not give rise to goodwill.
After initial measurement, the accounting for acquired long-lived intangible assets depends on the assigned useful lives. Intangible assets with finite lives are amortized according to their useful lives. In a taxable deal structure most acquired intangible assets, including indefinite-lived assets such as goodwill, are amortized over a 15-year period on a straight-line basis. Often, the useful lives and amortization of intangible assets can diverge on a tax versus book basis.
Post-Acquisition & ASC 360
Post-acquisition, it may be necessary to determine whether acquired long-lived intangible and tangible assets are impaired, a condition that exists when the carrying value of an asset or of an asset group exceeds its fair value.
Accounting Standards Codification 360 (ASC 360) presents the framework for testing long-lived assets for impairment under U.S. Generally Accepted Accounting Principles (US GAAP). This is a complex, multi-step process completed to identify the relevant asset group, test the assets for recoverability, determine the fair value of the asset group and re-measure each asset at fair value. It is important to have an understanding of the proper order of testing under ASC 360, as indefinite-lived intangible assets and goodwill often will need testing for impairment concurrently with long-lived assets, resulting in an iterative process with interdependent steps.
VRC has considerable experience in the valuation of long-lived assets for financial reporting. We assist numerous financial teams in performing impairment assessments of long-lived intangible assets under ASC 360, and have a thorough understanding of the best practices and financial reporting guidance required to perform these analyses consistent with current standards, resulting in values that withstand audit and regulatory scrutiny.