The Intent
You are required to test whether goodwill or other intangible assets recorded on the balance sheet still have real economic value.
How I Solve It
I do not treat goodwill as a single, abstract asset. I use the 25 Factors Affecting Business Valuation to break goodwill into its underlying components — client relationships, systems, workforce capability, brand strength, and market position. Key factors include Factor #11: Future Business Outlook, Factor #4: Return on Investment, Factor #24: Risk, and Factor #25: Opportunity.
The 5 Senses Inspection Report confirms whether the operational conditions that once supported goodwill still exist in practice.
Experience
It is vital because "What is goodwill impairment testing?" is not a mechanical calculation. It is a real-world judgment about risk, control, sustainability, and transferability — and that judgment is where 10–15 years of owner-operator and valuation experience, your gut–brain axis, does the heavy lifting.
Why It Is Not Mechanical
On paper, valuation appears formula-driven. In reality, governance rights, risk concentration, growth durability, market conditions, and stakeholder dynamics materially affect value.
Where Experience Changes the Number
Decisions around normalization, premiums, discounts, projections, and defensibility require judgment formed through lived ownership, negotiation, and financial accountability.
Why the Gut–Brain Axis Matters
The brain performs disciplined financial analysis. The gut recognizes unrealistic narratives, hidden leverage, emotional distortions, and deal risk. Together they produce conclusions that withstand scrutiny.
Protecting Financial Lives
The final number affects wealth, control, solvency, tax exposure, and long-term relationships. Requiring 10–15 years of serious hands-on business and valuation experience ensures the answer is fair, defensible, and durable. See my Experience page.
The Result
You receive an impairment conclusion that reflects real economic conditions and aligns with accounting standards.