When should intangible assets subject to amortization be tested for impairment?

Intangible assets that are subject to amortization should be tested for impairment if a triggering event is identified. This means that whenever there are indications that the carrying amount of an intangible asset may not be recoverable due to factors such as changes in market conditions, a decline in the asset's market value, or other events reflecting a possible decrease in the asset's value, an impairment test should be performed.

The reasoning behind this approach is that assets should not be carried on the balance sheet at amounts that exceed their fair value or recoverable amounts. Testing for impairment in response to specific triggering events helps in effectively monitoring and ensuring the accuracy of an entity's financial reporting regarding its intangible assets.

For instance, if a company experiences a significant loss of revenue that is tied to a specific intangible asset, this loss could be a trigger to assess whether the asset's carrying value is still justified. The focus on specific triggering events allows for a more dynamic and realistic valuation process, rather than relying on rigid timelines, which may not accurately reflect an asset's current worth or earnings potential.