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FASB Goodwill Impairment Standard Issued

Last week, the Financial Accounting Standards Board (“FASB”) published Accounting Standards Update (“ASU”) No. 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment. A result of the Simplification Initiative, the standard simplifies how a company tests goodwill for impairment by eliminating “Step 2”, which measures impairment loss by comparing the carrying amount of goodwill to its implied fair value. In its news release, the FASB said the ASU will allow companies to measure goodwill impairment as the excess of the reporting unit’s carrying value over its fair value. Stakeholders had complained that the current impairment test creates. Read More.

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Summary of FASB’s November 30 Meeting

In addition to approving a simplified goodwill impairment test , the Financial Accounting Standards Board (“FASB”) discussed the following topics at its November 30 meeting: Nonemployee share-based payment accounting. The FASB reached decisions based on feedback from external reviewers, and instructed staff members to develop a proposed Accounting Standards Update (“ASU”) with a 90-day comment period. Conceptual framework—measurement. The FASB reached decisions on guidance for the initial carrying amount of an asset, and instructed staff members to create an updated project plan regarding the elements of financial statements alongside the presentation and measurement concepts. Issue No. 16-B, “Employee Benefit Plan Master Trust Reporting.” The FASB ratified. Read More.

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FASB Approves Shortened Goodwill Impairment Test

A simplified version of the goodwill impairment test was approved by the Financial Accounting Standards Board (“FASB”). Receiving approval this week, the amendments offered in Proposed Accounting Standards Update No. 2016-230, Intangibles — Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment, are likely to be published early next year. The proposal eliminates Step 2 of the two-step process for calculating the impairment of a company’s acquired goodwill. Once published, the amendments will be effective for public companies in 2019. Privately held businesses must apply the amendments in 2020.

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Decisions Reached on Goodwill Impairment and Business Definition

At its October 10 meeting, the Financial Accounting Standards Board (“FASB”) discussed its proposed Accounting Standards Update (“ASU”), Intangibles—Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. The FASB used feedback to reach decisions on related matters such as the impairment test, reporting units with zero or negative carrying amounts, the fair value guidance, and the transition and effective date for the upcoming ASU. Also at the meeting, the FASB continued talks on its proposal for clarifying the definition of a business. Redeliberations on the proposed ASU, Business Combinations (Topic 805): Clarifying the Definition of a Business, covered. Read More.

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Upcoming FASB Proposal Offers Simplified Goodwill Impairment Test

In late March, the Financial Accounting Standards Board (“FASB”) is expected to release a proposal that shortens the goodwill impairment test public companies perform after an acquisition. The upcoming proposal would eliminate the second part of the two-step impairment test that calculates the decreased value amount of acquired goodwill. A one-step process would bring U.S. GAAP more in line with International Financial Reporting Standards and address complaints that the calculation of goodwill impairment is an expensive and unnecessary process. The FASB wants to issue the proposal for a comment period of 60 days.

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