FASB OKs additional timely goodwill impairment screening

Dive Temporary:

  • Finance teams can wait right until their firm’s following reporting time period to evaluate goodwill impairment relatively than when a triggering function takes place, the Economical Accounting Specifications Board (FASB) made the decision final 7 days. The scope will be “restricted to personal companies and not-for-profit entities.”
  • Evaluating goodwill impairment following a triggering occasion has been a dilemma for corporations, specially with the pandemic producing stock volatility in some sectors the adjust should be viewed as a favourable.
  • It has “drawn a large amount of curiosity from persons,” FASB Chair Richard Jones reported final thirty day period, as he talked about the possibility of switching the rule.

Dive Insight:

Goodwill refers to intangibles previously mentioned book benefit of a company at the time it is acquired by yet another company. FASB regulations require providers to evaluate any impairment to goodwill each time there is a triggering function, these as a fall in stock valuation.

The new rule, expected to be officially unveiled up coming month, allows businesses hold out until eventually their following quarterly or yearly reporting period of time to conduct the impairment take a look at. 

Companies experienced sought this adjust for the reason that tests impairment can be intricate and costly, and if a triggering party happens very long just before the next reporting interval, the evaluation could be outdated by the time the firm data files its studies. Now companies can wait, helping guarantee as precise an evaluation as probable.