The FASB issued a proposed Accounting Standards Update that would reduce the complexity for certain private companies and not-for-profit entities when evaluating goodwill impairment triggering events.
Under the current guidance in Subtopic 350-20, Intangibles – Goodwill and Other – Goodwill, an entity is required to monitor and evaluate goodwill impairment triggering events as they occur throughout the year. Because of the uncertainty in the economic environment during the COVID-19 pandemic, some stakeholders expressed concerns about the value of evaluating a triggering event at an interim date when certain private companies and not-for-profit entities report goodwill only on an annual basis.
In response to the concerns expressed by stakeholders, the FASB issued a proposed ASU intended to provide an accounting alternative allowing private companies and not-for-profit entities that only report goodwill on an annual basis to perform the goodwill impairment triggering event evaluation on the annual reporting date only. This option would reduce cost and complexity for preparers and provide more relevant information for users.
This proposed ASU would be effective for annual reporting periods beginning after December 15, 2019 and applied on a prospective basis. The scope of this accounting alternative would be limited to goodwill that is accounted for in accordance with Subtopic 350-20.
Written by Kayla Kwak
Edited by Yejee Won