The Financial Accounting Standards Board has tentatively decided it will make the goodwill impairment test simpler for public companies by dropping the dreaded second step in the current two-step test to determine the markdown.
FASB decided to take a fresh look at the controversial two-step test for determining whether a company should write down any goodwill in its balance sheet when the board agreed to its Private Company Council’s proposal for a simpler approach for private companies. Rather than requiring private companies to carry goodwill at cost and test it annually for impairment, FASB now allows private companies to amortize goodwill over 10 years. Impairment testing would only be required when triggering events occur suggesting its value is not holding up.
