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FASB Finalizes New Guidance on Goodwill Impairment Testing

Tammy Whitehouse | December 17, 2010

The Financial Accounting Standards Board has finalized its guidance on how companies should test goodwill for impairment, or a write down, when the book value of a given business unit falls into negative equity.

The FASB published Accounting Standards Update No. 2010-28 to explain that companies need to look at the situation a little more critically than perhaps they have in the past to reach a logical conclusion about whether a write down in goodwill might be in order. The guidance was recommended to the FASB by its Emerging Issues Task Force after the Securities and Exchange Commission questioned the method some companies were using.

Goodwill is an intangible asset that arises on corporate balance sheets as a result of a merger or acquisition. It represents the additional amount a company pays to acquire a business unit...

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