The Financial Accounting Standards Board (FASB) on Wednesday decided to move forward with and expand the scope of its proposed standard update regarding goodwill triggering events under Topic 350. The decision gives more private companies and not-for-profits an alternative for evaluating and measuring goodwill impairment at their reporting dates, including interim reports.
The Board added this project to its technical agenda at the end of last year to consider alternatives for private companies and not-for-profits for assessing triggering events for goodwill impairment. GAAP requires goodwill to be tested for impairment whenever a triggering event occurs that indicates it is more likely than not the fair value of the reporting unit is less than its carrying value. The project’s objective is to address the cost and complexity for these entities that are currently required to perform triggering event evaluations and measure potential impairment in interim periods although they only prepare GAAP financial statements annually.
The original scope of the proposed standard update provided an accounting alternative for private companies and not-for-profits that only report goodwill (or net income and retained earnings that would be affected by an impairment) annually to only perform a goodwill triggering event assessment at the annual report date. The Board expanded the scope to allow private companies and not-for-profits to elect the alternative to assess goodwill impairment triggering events at their reporting dates any time they report financial information, including in interim periods.
The Board affirmed these decisions:
- The scope of the amendments is limited to private companies and not-for-profits that account for goodwill and test impairment under FASB Subtopic 350-20 (Intangibles—Goodwill and Other—Goodwill).
- No additional incremental disclosures are required as a result of the amendment, as there are already sufficient disclosure requirements under Subtopic 350-20 and the requirements for notes to financial statements.
- Adoption of the amendments is not limited to a specified time period but is available on an ongoing basis.
- The amendments can be elected prospectively by applying a one-time election, and there is no requirement to apply preferability guidance under GAAP for the accounting change.
The Board directed staff to issue a final standard, which is expected in March.