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FASB proposes easier way to measure goodwill impairment

Tammy Whitehouse | May 16, 2016

The Financial Accounting Standards Board is proposing a new, simpler way to measure any reduction in the value of goodwill that companies should recognize on the balance sheet.

Goodwill is an asset that arises through mergers or acquisitions, representing the premium a company pays to purchase a business unit over and above the fair value of its individual assets and liabilities. The accounting for goodwill in periods after an acquisition has been a source of angst for preparers as current rules require detailed testing to determine if the value is holding up in subsequent periods, not to mention measurement if its value is faltering to determine what amount should be marked down.

FASB simplified the testing rules to give...

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