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The SEC staff has focused on the quality of the disclosure around significant judgments and estimates associated with goodwill and intangible assets, including impairment assessments, frequently commenting on:
  • the identification of reporting units, including factors considered when multiple components have been combined into a single reporting unit due to economic similarities;
  • at risk reporting units, including information about the amount of goodwill and headroom at the reporting unit, discussion of the key assumptions used to determine the reporting unit’s fair value and their associated degrees of uncertainty, and a description of potential events or changes in circumstances, such as the COVID-19 pandemic, that could negatively affect the key assumptions;
  • triggering events that may indicate that an interim impairment assessment is necessary; and
  • the timing of goodwill and intangible asset impairment charges.
Comment Examples
Guidance references
  • We note your statement that your reporting units with goodwill are equivalent to your operating segments. Please tell us your operating segments and if your operating segments changed during the year. If you have aggregated any of your operating segments when determining your reportable segments, please revise the segment footnote in your financial statements to disclose that operating segments have been aggregated. See ASC 280-10-50-21(a).
  • Please tell us how you considered the qualitative factors outlined in ASC 350-20-35-3C when performing your goodwill impairment analysis and clarify whether you performed a qualitative or quantitative assessment, or both. Also, tell us whether any of your reporting units are at risk of failing a quantitative analysis and if true, revise your critical accounting policies to disclose:
    • the percentage by which fair value exceeded carrying value as of the date of the most recent test;
    • the amount of goodwill allocated to the reporting unit;
    • a discussion of the degree of uncertainty, which includes specifics to the extent possible, associated with key assumptions used in your analysis; and
    • a description of potential events and/or changes in circumstances that could reasonably be expected to negatively affect the key assumptions.

    If you have determined that estimated fair values substantially exceed the carrying values of your reporting units, please disclose such determination. Refer to Item 303(a)(3)(ii) of Regulation S-K and Section V of SEC Release 33-8350.
  • We note your disclosure in your Form 10-K that as of the end of your fiscal year, the fair value of your goodwill exceeded the carrying value by a minimal amount. Your stock price has continued to decline and you recognized operating cash flow losses and operating losses during the first quarter. Additionally, we note significant decreases in total revenues for the first quarter of the current year compared to the prior year. Tell us how you considered whether these trends were considered to be a triggering event for an additional goodwill impairment analysis. Please refer to ASC 350-20-35-30.
  • We note your disclosure that, due to general market declines driven by the coronavirus pandemic, you performed impairment testing on your goodwill and indefinite-lived intangible assets. In order to provide investors with information to better assess the probability of future goodwill impairment charges, please disclose that the estimated fair values of the intangible assets you quantitatively tested for impairment substantially exceeded their carrying values. For any asset whose estimated fair value did not substantially exceed its carrying value, please disclose the percentage by which fair value exceeded carrying value at the date of the most recent test.
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