Last Updated: August 2026

An ASC 350 goodwill triggering event is a change that makes it more likely than not that a reporting unit’s fair value has fallen below its carrying amount. When that happens, a firm must test goodwill for impairment right away, between its yearly tests. The stakes are large. U.S. public companies wrote down $96 billion in goodwill during 2024, up 16 percent from the year before, per the Kroll 2025 U.S. Goodwill Impairment Study. Sofer Advisors helps owners spot these events early.

The test itself is not the hard part. Spotting the trigger is. ASC 350 asks leaders to watch for warning signs at each reporting date, not once a year. A trigger can come from outside the business, like a slump, or from inside it, like a lost contract. Miss it, and the books overstate value.

Key Takeaways

  1. Trigger defined: A triggering event is any change that makes it more likely than not that a reporting unit’s fair value is below book value.
  2. Interim test required: A confirmed trigger forces a goodwill impairment test between the annual tests, not at year end.
  3. Step 0 comes first: A quick qualitative check weighs the facts before any full quantitative test begins.
  4. Private companies get an option: They may write off goodwill and test only when a trigger appears.
  5. Records defend the call: A dated memo and backup data show auditors why you did or did not test.

These points frame how a trigger drives the review. The sections below define the event, its common signals, and how to weigh and record each one.

What is an ASC 350 goodwill triggering event?

An ASC 350 goodwill triggering event is any change that makes it more likely than not that a reporting unit’s fair value sits below its carrying amount. The rule lives in ASC 350-20-35-3C. It does not ask for a formula. It asks for judgment. Leaders weigh economic, industry, and company facts together. If that evidence points to lost value, a goodwill impairment test must follow.

The phrase “more likely than not” means a chance above 50 percent. That is a low bar to clear. One soft quarter may not reach it. A clear pattern often does. The Financial Accounting Standards Board, or FASB, wrote the rule this way on purpose. It wants early warning, not a late surprise at year-end. David Hern CPA ABV ASA reads these signs against fresh market data, so the call rests on proof, not a hunch.

What events commonly trigger an impairment test?

Common triggers fall into a few clear groups. Big-economy shifts come first, like a slump, rising interest rates, or tight credit. Industry decline is next, such as new rivals or falling demand. Market signals matter too. A sustained drop in share price or market value is a classic trigger. Company shocks round out the list. These include the loss of a key customer, the exit of key managers, or fresh doubt about going concern.

Trigger category Example indicator What it signals
Macroeconomic Recession, higher rates, tight credit Rising cost of capital and a lower fair value
Industry New rivals, weak demand, price wars Thinner margins across the whole sector
Market Falling share price or market capitalization Investors now value the unit below its books
Entity-specific Lost key customer or key management Future cash flows and earning power at risk
Legal or regulatory New rule, fine, or lost contract A direct, near-term hit to unit value

One signal rarely acts alone. A slump often drags share prices down and squeezes margins at the same time. The Kroll study found the 2024 write-downs clustered in a few sectors. Communication services, consumer staples, and healthcare made up most of the total, which shows how industry and market triggers move together. Sofer Advisors uses its Discovery phase to tell a real trigger from ordinary noise, so a brief dip does not force a needless test while a true decline never slips past.

How does the Step 0 qualitative assessment work?

Step 0 is the first gate. It is a qualitative check of the same facts a trigger raises. Leaders ask one question. Is it more likely than not that fair value now sits below book value? The review weighs margins, demand, cost trends, and market value together. If the answer is no, the work can stop there, with the reasoning on file. If the answer is yes, the firm moves to the full quantitative test.

The quantitative step, once called Step 1, measures the gap. It compares the reporting unit’s fair value against its carrying amount. A valuation team builds fair value with an income approach, often a discounted cash flow model, then checks it against market deals. Any shortfall becomes the impairment loss, capped at the goodwill on the books. Deloitte’s Roadmap to Goodwill and Intangible Assets Accounting covers both steps in depth.

Can private companies test goodwill differently?

Yes. Private companies may elect an accounting choice that changes the rhythm of the work. Under it, they write off goodwill over ten years or less. They skip the yearly impairment test. Instead, they test goodwill only when a triggering event appears. This path suits smaller firms with less audit scrutiny.

The option traces back to rules the FASB set with the Private Company Council. You can read the standard in FASB Accounting Standards Update 2014-02. The choice is not automatic, and it carries trade-offs. A yearly write-off lowers reported earnings. It can also muddy a future sale, when a buyer wants clean numbers. Sofer Advisors walks private owners through the choice before they lock it in.

How do you document a triggering event assessment?

Auditors expect a written record, whether or not a test follows. A dated memo is the core of it. It names the events reviewed, the logic used, and the call reached. Strong files add board minutes, updated forecasts, and current market data. The point is to show that leaders looked, weighed the facts, and made a sound call. A “no trigger” finding needs the same care as a choice to test.

Good records lower audit risk and speed the review. When the file is thin, auditors ask more, and the close drags. This reflects the Heart of a Teacher approach that Sofer Advisors brings to each job. The team does not just hand over a number. It shows the owner and the audit committee the logic behind it. AICPA valuation standards stress this same link between sound judgment and a clear paper trail.

Who should perform the triggering event assessment?

Company leaders own the assessment. They must watch the business and decide, at each reporting date, whether a trigger has occurred. The audit committee then reviews that call. Many teams bring in a third-party valuation expert, above all when the facts are close or the numbers are large. An outside expert adds independence, which auditors value.

The choice of partner shapes the result. Large firms such as Alvarez and Marsal, Kroll, or a Big 4 practice serve big public companies with global units. Solo practitioners work at the other end, cheaper but thin on data and backup. Sofer Advisors sits in between. Through The Sofer Difference, a four-phase process of Discovery, Diligence, Analysis, and Delivery, it brings senior-level rigor to middle-market owners. With a full W2 team of 14, 180+ five-star Google reviews, and expert witness work in 11+ cases across Georgia, Florida, California, and New Mexico, the firm backs every call with proof.

Frequently Asked Questions

What is a goodwill triggering event under ASC 350?

It is any change that makes it more likely than not that a reporting unit’s fair value has fallen below its carrying amount. The standard sets this out in ASC 350-20-35-3C. Once a firm spots one, it must test goodwill for impairment between the annual tests. The rule relies on judgment about economic, industry, and company facts, not on a single fixed formula.

What are common examples of triggering events?

Common examples include a recession, rising interest rates, and tight credit. Industry decline, new competition, and falling demand also count. A sustained drop in share price or market capitalization is a frequent trigger. So are company shocks, such as the loss of a major customer or the exit of key management. New laws, fines, or a lost contract also count.

Does a falling stock price trigger a goodwill impairment test?

A short dip usually does not. A sustained decline often does, above all when market value falls below book value for a stretch. That gap tells you the market now prices the business under its recorded worth. It is one of the clearest triggers under ASC 350. Leaders still weigh it with other facts, since price swings alone do not always mean a lasting loss in fair value.

How often must a company check for triggering events?

A public company must watch for triggers all year and assess them at each interim reporting date, usually every quarter. Waiting for the annual audit risks a wrong balance sheet. Private firms that elect the accounting choice may check only at each reporting date. Either way, the duty to watch for warning signs never fully pauses between the formal test dates.

What is the difference between Step 0 and Step 1?

Step 0 is a quick qualitative check. It asks whether it is more likely than not that fair value sits below book value. If the answer is no, the review can stop. Step 1 is the quantitative test. It measures fair value against the carrying amount and records any shortfall as an impairment loss. The loss cannot exceed the goodwill recorded for that reporting unit.

Can a private company amortize goodwill instead of testing it yearly?

Yes. Under an accounting choice, a private company may write off goodwill over ten years or less. It then tests for impairment only when a triggering event appears, rather than every year. A later update lets it check triggers just at each reporting date. This path lowers cost and effort. It also lowers reported earnings each year and can muddy a future sale, so the choice deserves careful thought.

Who decides if a triggering event has occurred?

Company leaders hold that duty. They watch the business and, at each reporting date, decide whether a trigger has occurred. The audit committee reviews the call as a final check. Many teams hire a third-party valuation firm to support the call, which adds independence and depth. Auditors give more weight to a decision backed by outside work than to one made alone.

What documentation do auditors expect?

Auditors expect a dated memo that names the events reviewed, the logic used, and the call reached. Backup items strengthen the file, such as board minutes, updated forecasts, and current market data. A choice not to test needs the same support as a choice to test. Clear records lower audit risk and speed the year-end close, since they answer the reviewer’s questions in advance.

Does going concern doubt count as a triggering event?

Yes. Serious doubt about a company’s ability to continue as a going concern is a strong triggering event. It signals deep stress in cash flow, funding, or demand, all of which point to lost value. When such doubt arises, leaders should test goodwill for impairment without delay. The doubt rarely stands alone, so the review usually finds other triggers, like weak earnings, next to it.

How much does goodwill impairment testing from Sofer Advisors cost?

Goodwill impairment testing engagements under ASC 350 from Sofer Advisors typically run $7,500 to $25,000. The range depends on the number of reporting units, the quality of your records, and how much scrutiny your auditor expects. Simpler single-unit reviews sit near the low end. Multi-unit tests with a full quantitative measurement sit higher. Contact Sofer Advisors for a fee quote matched to your facts. These figures are estimates only.

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Executive Summary

An ASC 350 goodwill triggering event is a change that makes it more likely than not that a reporting unit’s fair value has dropped below book value. It forces an interim impairment test between the annual tests. U.S. public companies wrote down $96 billion in goodwill during 2024, up 16 percent from the prior year. Common triggers include a slump, a sustained share-price decline, a lost key customer, and going concern doubt. Leaders run a quick Step 0 check first, then a full quantitative test if needed. Private companies may write off goodwill and test only on a trigger. Clear records defend every call under FASB and AICPA rules.

What Should You Do Next?

Start by naming your reporting units and listing any change that could point to lost value this quarter. Then run a short Step 0 check and save the reasoning, whether or not you test. Gather board minutes and current forecasts so an auditor can follow it.

For a triggering event review you can defend, work with David Hern CPA ABV ASA and the Inc. 5000 team at Sofer Advisors. Schedule a consultation to discuss your ASC 350 goodwill position.

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About the Author

This guide was prepared by David Hern CPA ABV ASA, founder of Sofer Advisors, a business valuation firm headquartered in Atlanta, GA serving clients across the United States. David holds dual accreditations as an Accredited Senior Appraiser (ASA) and is Accredited in Business Valuation (ABV), credentials recognized by the IRS, SEC, and FINRA. He also holds the Certified Exit Planning Advisor (CEPA) designation. With 15+ years of valuation experience, David has served as an expert witness in 11+ cases across multiple jurisdictions and built Sofer Advisors into an Inc. 5000-recognized firm with 180+ five-star Google reviews. Its full W2 employee team maintains subscriptions to all major valuation databases and operates under a next business day response policy. For professional business valuation services, visit soferadvisors.com/about-us/ or contact Sofer Advisors at soferadvisors.com/contact-us/.

 

Disclaimer: This content is for informational purposes only and does not constitute professional valuation advice. Business valuation conclusions depend on specific facts and circumstances. Contact Sofer Advisors for guidance regarding your specific situation.