Smith Micro Software (NASDAQ: NASDAQ:SMSI) disclosed today that it will record a material non-cash goodwill impairment charge in the first quarter of 2024. The decision follows an interim goodwill impairment test prompted by a prolonged decline in the company's share price and market capitalization since February 23, 2024.
The software company, which operates as a single reporting unit, determined that its carrying value exceeded its fair value. The exact amount of the impairment charge is yet to be determined as valuation work is still ongoing. Smith Micro has indicated that it will provide an estimate or range of the impairment charge in an amended 8K filing or in its upcoming Form 10-Q.
Goodwill impairment is an accounting adjustment that occurs when the value of goodwill on a company's balance sheet falls below its fair value, indicating that the assets acquired during a merger or acquisition are not producing the expected returns.
Smith Micro assured stakeholders that the impairment charge would not necessitate any cash expenditures and does not anticipate it affecting the company's compliance with any financial agreements.
This announcement is based on the information provided in the company's 8K filing with the Securities and Exchange Commission. The impairment is a non-cash charge, and the company's financial position in terms of liquidity and cash flow is not directly affected by this accounting adjustment. Investors and interested parties await further details, which will be shared by Smith Micro upon completion of the valuation review.
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