FASB Ends Goodwill Accounting Project
The Financial Accounting Standards Board (FASB) recently unanimously voted to remove from its technical agenda its project on identifiable intangible assets and the subsequent accounting of goodwill.
The project was added to the FASB’s technical agenda in October 2018. In 2019, the board issued an invitation-to-comment for public comment and held roundtable discussions on the project.
In announcing the decision, board members said they were not convinced that the change would improve current rules. The board noted that investors have said the information would only provide marginal benefits.
The key issue being debated had been whether to utilize an impairment with amortization model or retain the impairment-only model. FASB had moved toward requiring that entities apply an impairment with amortization model. An entity would amortize goodwill over a 10-year default period limited to a 25-year cap. Reassessing the amortization period would be prohibited. Goodwill would be tested for impairment only upon a triggering event, and companies would continue to test goodwill for impairment at the reporting unit level. Customer relationship intangible assets that are not separable would be subsumed into goodwill.
Although FASB voted to end the project, board members also stated they do not think the current accounting of goodwill is an accurate reflection of goodwill and that the current impairment model should be revised.
FASB Chair Richard Jones said that the board would continue to monitor the International Accounting Standards Board’s (IASB) project on goodwill and impairment going forward.