On Friday, the Financial Accounting Standards Board issued a proposed update to its requirements for testing goodwill for impairment. The proposal is a response to concerns expressed by non-public companies about the cost and complexity of complying with the current test, FASB member Darryl Buck said in a release.
Goodwill impairment occurs when the carrying value of the goodwill exceeds its fair value, as this definition notes. The current test for goodwill impairment, required under Topic 350, Intangibles—Goodwill and Others, follows several steps, which are outlined in this brief from FASB. Companies first compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value is lower, they proceed to the second step of measuring the amount, if any, of loss due to impairment.
