The FASB issues alternative to goodwill triggering event assessment in an Accounting Standards Update (ASU) that provides an accounting alternative expected to reduce the complexity for private companies and not-for-profit organizations when performing the goodwill triggering event evaluation.
Under current GAAP, one tests goodwill for impairment when a triggering event occurs that indicates that it is more likely than not that the fair value of the reporting unit is below its carrying value. Companies and organizations must monitor for and evaluate goodwill triggering events when they occur throughout the year.
This ASU provides an accounting alternative that allows private companies and not-for-profit organizations to perform a goodwill triggering event assessment, and any resulting test for goodwill impairment, as of the end of the reporting period, whether the reporting period is an interim or annual period. It eliminates the requirement for companies and organizations that elect this alternative to perform this assessment during the reporting period, limiting it to the reporting date only.
The scope of the alternative is limited to goodwill that is tested for impairment in accordance with Subtopic 350-20, Intangibles—Goodwill and Other—Goodwill. The amendments in the ASU are effective on a prospective basis for fiscal years beginning after December 15, 2019. This ASU permits early adoption for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. An entity should not retroactively adopt the amendments in this ASU for interim financial statements already issued in the year of adoption.
The amendments in the ASU also include an unconditional one-time option for entities to adopt the alternative prospectively after its effective date. No additional disclosures would be required.
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