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22 April 2011

FASB prepared update on testing goodwill for impairment


The FASB issued an Exposure Draft of a proposed Accounting Standards Update intended to simplify how an entity is required to test goodwill for impairment. The comment period for the proposed Update extends through June 6, 2011.

The amendments in this Update would allow an entity to assess qualitative factors first 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.

Press release


© FASB

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