NEWS RELEASE 04/22/11
FASB Issues Proposed Accounting Standards Update on Testing Goodwill for
Impairment
Norwalk, CT, April 22 2011—The Financial
Accounting Standards Board (FASB) today issued an Exposure Draft of a proposed
Accounting Standards Update (Update) intended to simplify how an entity is
required to test goodwill for impairment.
“Nonpublic companies have
expressed concerns to the Board about the cost and complexity of performing the
goodwill impairment test,” states FASB member Daryl Buck. “The proposals
contained in this Update are intended to address those concerns and to simplify
and improve the process for public and nonpublic entities alike.”
The
amendments in this Update would allow an entity to first assess qualitative
factors to determine whether it is necessary to perform the two-step
quantitative goodwill impairment test. Current guidance requires an entity to
test goodwill for impairment, on at least an annual basis, by first comparing
the fair value of a reporting unit with its carrying amount, including goodwill.
If the fair value of a reporting unit is less than its carrying amount, then the
second step of the test must be performed to measure the amount of impairment
loss, if any. Under the proposed amendments, an entity would not be required to
calculate the fair value of a reporting unit unless the entity determines, based
on a qualitative assessment, that it is more likely than not that its fair value
is less than its carrying amount. The proposals include a number of factors to
consider in conducting the qualitative assessment.
If approved, the
amendments in the proposed Update would be effective for annual and interim
goodwill impairment tests performed for fiscal years beginning after December
15, 2011. Early adoption would be permitted.
The comment period for the
proposed Update extends through June 6, 2011. The Exposure Draft is available at
www.fasb.org. For this proposed Update, the FASB is piloting a new electronic
constituent feedback form intended to make it easier to submit
comments. Constituents wishing to provide traditional comment letters via the
current process can continue to do so.
About the Financial
Accounting Standards Board
Since 1973, the Financial Accounting
Standards Board has been the designated organization in the private sector for
establishing standards of financial accounting and reporting. Those standards
govern the preparation of financial reports and are officially recognized as
authoritative by the Securities and Exchange Commission and the American
Institute of Certified Public Accountants. Such standards are essential to the
efficient functioning of the economy because investors, creditors, auditors, and
others rely on credible, transparent, and comparable financial information. For
more information about the FASB, visit our website at www.fasb.org.