New Option Available for Accounting for Intangible Assets

The Financial Accounting Standards Board has issued new rules pertaining to accounting by private companies for identifiable intangible assets in a business combination, based on a consensus of the Private Company Council. Accounting Standards Update No. 2014-18, Business Combinations (Topic 805), was issued in December 2014. Under the new rules, an eligible entity is no longer required to to recognize the following intangible assets acquired in a business combination separately from goodwill:

  1. customer related intangibles (unless they can be sold or licensed separately from the business)
  2. non-compete agreements

Such change was intended to address the cost/benefit mismatch of the prior requirements for separate identification. However, a company that elects this treatment must also elect to follow ASU 2014-02, Accounting for Goodwill and amortize the recognized combined goodwill accordingly.

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