How often should intangible assets with indefinite lives be tested for impairment?

Intangible assets with indefinite lives must be tested for impairment annually as well as whenever there is a reason to believe that they may be impaired. This approach aligns with the guidelines established by accounting standards such as the Financial Accounting Standards Board (FASB) under ASC 350.

The rationale behind this requirement is that intangible assets like trademarks, trade names, or goodwill don't have a finite lifespan, making regular assessments necessary to ensure their carrying amount is not greater than their fair value. Annually testing for impairment allows companies to identify any shifts in market conditions or operational changes that may affect the value of these assets. Moreover, if a triggering event occurs—such as significant operational losses or adverse economic conditions—the company must perform an additional impairment test.

Other options do not meet the requirements set forth by accounting principles regarding intangible asset impairment. Testing every quarter may lead to excessive and unnecessary valuation efforts. Conducting tests only during audits or every five years does not capture more frequent changes in the business environment that could affect the asset's fair value, thus exposing the company to the risk of overstating the asset value on its balance sheet.