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Small Business Committee Wants Goodwill Accounting Changes

The Financial Accounting Standards Board’s (“FASB”) Small Business Advisory Committee is pushing for additional changes to the standard setter’s guidance for acquired goodwill. At a meeting last week, committee members said they want the FASB to provide the same simplified accounting approach to goodwill that private companies receive. Over the years, Topic 350, Intangibles — Goodwill and Other, has caused headaches among many financial professionals. Public companies must conduct an impairment test at least once a year to check for declines in goodwill value. If a value drop occurs, companies are required to take an impairment charge that usually indicates overpayment. Read More.

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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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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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FASB Approves Technical Corrections to U.S. GAAP

A handful of routine corrections and clarifications to U.S. GAAP will soon be published as final amendments. Approved October 19 by the Financial Accounting Standards Board (“FASB”), two of changes were introduced in April as part of Proposed Accounting Standards Update (ASU) No. 2016-220, Technical Corrections and Improvements: Subtopic 820-10, Fair Value Measurement — Overall. The updated guidance clarifies the difference between a valuation approach and a valuation technique. An organization now must disclose when it changes to a valuation approach or valuation technique, and explain why the change occurred. ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting. Read More.

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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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Private Company Accounting Alternatives Removed

Impacting the use of private company accounting alternatives, the Financial Accounting Standards Board has issued Accounting Standards Update (ASU) No. 2016-03 . The ASU eliminates the effective dates for the following alternatives: ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350). ASU No. 2014-03, Derivatives and Hedging (Topic 815). ASU No. 2014-07, Consolidation (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements. ASU No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination. ASU No. 2016-03 also waives the preferability assessment for the first time a private entity applies a private company accounting alternative. The amendments in ASU No. 2016-03 are effective immediately.

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