FASB: Accounting standards update to simplify testing goodwill for impairment

15 September 2011

The FASB issued Accounting Standards Update No 2011-08, 'Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment'. The Update simplifies how an entity tests goodwill for impairment.

As announced in August, the amendments contained in the Update are intended to address concerns expressed by private companies about the cost and complexity of the goodwill impairment test. The amendments allow both public and nonpublic entities an option first to assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under that option, an entity would no longer be required to calculate the fair value of a reporting unit unless the entity determines, based on that 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 events and circumstances to consider in conducting the qualitative assessment. (More information is available in the August 12, 2011 edition of 'FASB in Focus'.)

The amendments will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted.

Press release

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