Nonprofit Blog

Impairment testing is designed to give bankers and other stakeholders an early warning sign that the value of a company’s goodwill, brand or other indefinite-lived intangible asset has decreased. Here’s guidance on which intangible assets are subject to impairment, how it’s measured and how the accounting rules about impairment testing are evolving.

Few people stick with one employer for their entire careers. But it’s common for business owners to feel blindsided when a key person, such as a top manager, CEO, CFO or lead salesperson, unexpectedly resigns. The effects often trickle down the organization, impacting morale and productivity.

A new financial reporting standard issued by the Financial Accounting Standards Board (FASB) may require borrowers to re-evaluate their leasing decisions. The new standard, Accounting Standards Update No. 2016-02, Leases (Topic 842), goes into effect for annual periods beginning in 2019 for calendar-year public companies. Privately held borrowers will have an extra year to implement the changes.

Borrowers that operate various lines of business under one “roof” may expose themselves and their bankers to high levels of financial and legal risks. But creating separate legal entities for different business lines or assets can reduce those risks.

For many types of businesses — including retailers and manufacturers — inventory is typically a leading source of collateral. But you can’t always accept inventories at face value, because borrowers may use different accounting methods to report their inventories. Before committing to a deal or when reviewing an existing customer’s financial performance, it’s important to understand how the company reports its inventory.

Years of historically low interest rates have led many companies to stockpile cash and otherwise become lax in their working capital management. But excess cash in the bank and money that’s tied up in bloated inventory and receivables might be better spent investing in new business opportunities or repaying debt.

Borrowers need to upgrade equipment to stay productive and competitive. But retiring these assets without following secure disposal protocol can be risky. Here’s an overview of what could possibly go wrong when a retired piece of equipment sits idle in a storage closet or garbage dump — or it’s returned to the leasing company.