1.5 Interaction of ASC 280 With Accounting for Goodwill
Under ASC 350-20, goodwill is generally tested at the level of the reporting unit, which the ASC master
glossary defines as “an operating segment or one level below an operating segment (also known as a
component).” Therefore, it is important for entities to clearly distinguish among operating segments,
reportable segments, and reporting units. ASC 280 addresses operating segments and reportable
segments, while ASC 350 addresses reporting units.
In determining reporting units under ASC 350, an entity would begin with the
definition of an operating segment in ASC 280 and
consider disaggregating that operating segment
into economically dissimilar components to test
for goodwill impairment. Likewise, in determining
reportable segments under ASC 280, an entity would
begin with an operating segment, as defined in
U.S. GAAP, but would be permitted to aggregate
operating segments that meet certain criteria into
a single operating segment. The operating segments
— or aggregated segments — that meet certain
thresholds in ASC 280 represent reportable
segments.
The diagram below gives an overview of the interplay between these concepts.
Operating segments and reportable segments are explored further in this Roadmap. See Appendix B
for additional discussion of the identification of reporting units.
1.5.1 Considerations for Entities That Are Not Within the Scope of ASC 280
Section 1.6 addresses the
scope of ASC 280. Entities that are not within the scope of that guidance but
have goodwill balances that must be tested for impairment will, however, need to
consider the portions of ASC 280 related to the identification of operating
segments unless the entities (1) are eligible for and have elected the
alternative accounting for the subsequent measurement of goodwill outlined in
ASC 350-20-35-62 through 35-82 and (2) elect an
accounting policy to test goodwill for impairment at the entity level, as
discussed in ASC 350-20-35-65.