What it is
Goodwill is tested for impairment at the reporting unit level at least once a year and when an event makes impairment more likely than not. The test compares the fair value of the unit with its carrying amount; the loss is the shortfall, up to the goodwill assigned to the unit.
This memo documents the reporting units, the qualitative screen, the quantitative test, the valuation assumptions with sensitivities, the reconciliation to market evidence, the entry and the disclosure inputs. It applies to entities that test goodwill, and records a private company election where one is used.
When to use it
- At the annual test date for every reporting unit with goodwill.
- When a triggering event occurs between annual tests.
- To give the auditor and any valuation reviewer a complete record of the judgments.
What’s inside
- Reporting unit table with goodwill assigned and carrying amounts
- Qualitative assessment factor table and conclusion
- Quantitative test, loss limit and deferred tax effect
- Valuation assumptions with discount rate and growth sensitivities
- Reconciliation to market capitalization or transaction evidence, entries and disclosure
Standard cited
This template follows ASC 350-20. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
Can the qualitative assessment be skipped?
Yes. The entity can go straight to the quantitative test in any period. When it does use the qualitative screen and concludes that impairment is not more likely than not, it stops there for that unit.
How big is the impairment loss?
The excess of carrying amount over fair value, not more than the goodwill assigned to the reporting unit. The former second step that computed implied goodwill is no longer performed.
Why reconcile to market capitalization?
The sum of the unit fair values should be explainable against the entity’s market value or a recent transaction. A large unexplained gap points to a flaw in the assumptions.
Related templates
- ASC 350 Goodwill Impairment Test Workbook
- Disclosure Checklist: Goodwill and Other Intangibles (ASC 350)
- ASC 805 Business Combination Accounting Memo
- Audit Memo Template (Matter, Evidence, Conclusion)
Last updated 11/05/2026. All free templates.