Goodwill Impairment Tests Become Easier

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2011-08, entitled “Testing Goodwill for Impairment”. This amends guidance in Generally Accepted Accounting Principles (GAAP) Topic 350 involving goodwill and other intangible assets. Because early adoption is allowed, and the new guidance simplifies significantly the current procedures, expect the new guidance to be widely implemented immediately.

The new guidance simplifies the work currently required in the annual assessment of whether intangible assets need to be written down. The FASB’s update includes examples of events and circumstances when an entity should consider performing the more formal tests. The examples are not all-inclusive.

The only losers in this change are the business valuation firms that will no longer get annual “annuity” business valuation assignments to make the more formal assessments that are no longer required.

Our expanded article discusses the change in greater detail, and provides background and context.



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