In what circumstance is goodwill testing for impairment required?

Goodwill testing for impairment is specifically required only upon a triggering event. This means that businesses must evaluate the carrying value of goodwill when certain conditions indicate that it might not be recoverable. These triggering events can include a variety of factors such as a significant downturn in market conditions, changes in technology, or adverse changes in the business environment that could affect the value of the reporting unit associated with the goodwill.

Additionally, while there are occasions when companies may choose to test for goodwill impairment more frequently to better reflect their financial health, the formal requirement is to conduct these assessments only when there are specific indicators of impairment. This approach ensures that assessments are both relevant and resource-efficient, focusing efforts on times when value changes are most likely to have occurred.

Choosing to test goodwill annually, as suggested in another option, could impose unnecessary burdens on businesses without providing additional benefits unless there are signs of potential impairment. Similarly, testing at management's discretion or every five years without regard to the actual business conditions does not align with the need for a structured and event-driven impairment testing process.