NEWS RELEASE 08/10/11
FASB Approves Standard to Simplify Testing Goodwill for
ImpairmentNorwalk, CT, August 10, 2011—The Financial
Accounting Standards Board (FASB) today approved a revised accounting standard
intended to simplify how an entity tests goodwill for impairment.
Board´s decision today comes as a direct result of what we heard from private
companies, which had expressed concerns about the cost and complexity of
performing the goodwill impairment test," states FASB member Daryl Buck. "The
amendments approved by the Board address those concerns and will simplify the
process for public and nonpublic entities alike."
The amendments will
allow an entity to first assess qualitative factors to determine whether it is
necessary to perform the two-step quantitative goodwill impairment test. An
entity no longer will 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
guidance also includes examples of the types of factors to consider in
conducting the qualitative assessment.
Prior to today´s decision,
entities were required 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 is to be performed to
measure the amount of impairment loss, if any.
The amendments will be
effective for annual and interim goodwill impairment tests performed for fiscal
years beginning after December 15, 2011. Early adoption will be
The FASB issued its initial proposal for revising the testing
of goodwill for impairment in an Exposure Draft in April 2011. The FASB expects
to issue a final Accounting Standards Update in September
About the Financial Accounting Standards
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.