Small Business Committee Wants Goodwill Accounting Changes

December 12, 2017

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 of an acquisition. It also signals that the newly acquired assets will boost earnings growth in the short term.

Despite the FASB’s attempts to make the impairment test easier to follow, companies have complained that the test is too convoluted and time-consuming. Investors have also criticized the impairment test, saying there is a delay between when the impairment occurs and disclosure of the charge in a company’s financial statement.

The FASB has no short-term plans to amend goodwill accounting, but Chairman Russell Golden said it intends to keep goodwill on its research agenda. What direction Golden could take on the matter, however, remains uncertain.