When is an impairment test performed under private company rules?

An impairment test is performed specifically when a triggering event occurs because this aligns with the standards set for private companies. Triggering events are typically situations that may indicate that an asset's carrying amount may not be recoverable, such as significant declines in market value, adverse changes in technology or the business environment, or other circumstances that may negatively impact the future cash flows of the asset.

This approach ensures that companies assess the value of their assets only when there is a legitimate reason to do so, rather than implementing a routine or discretionary evaluation. Conducting impairment testing only during such occurrences helps maintain a balance between the necessity of asset valuation and the cost of testing, allowing companies to conserve resources and focus on the areas that genuinely require attention.

In contrast, conducting impairment tests at a company’s discretion or yearly, regardless of circumstances, would not be in line with the requirement of determining impairment when evidence suggests it is necessary. Additionally, limiting the tests to just during a public offering would not be applicable to private companies, as this rules out the need for ongoing assessment outside of that specific event.