Project Update

Accounting for Goodwill for Public Business Entities and Not-for-Profit Entities

Last updated on November 13, 2014. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)


The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Project Objective
Due Process Documents
*Decisions Reached at Last Meeting
*Tentative Board Decisions Reached to Date
*Next Steps
*Board/Other Public Meeting Dates
Background Information
Contact Information

Project Objective

The objective of this project is to reduce the cost and complexity of the subsequent accounting for goodwill for public business entities and not-for-profit entities.

Due Process Documents

On November 25, 2013, the Board added a project to its agenda on the accounting for goodwill for public business entities and not-for-profit entities. No documents have been issued to date.

*Decisions Reached at Last Meeting

The November 5, 2014, Board meeting was for educational purposes; the Board did not make any technical decisions. A summary of the discussion and the outcome of the meeting is included below.

The Board discussed additional outreach and research performed by the staff on the subsequent measurement of goodwill, including the results of the IASB’s Post-Implementation Review (PIR) of IFRS 3, Business Combinations, and the results of a study on the use of the qualitative assessment introduced in FASB Accounting Standards Update No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment.

The Board decided to add a separate project to its agenda for public business entities and not-for-profit entities on the accounting for identifiable intangible assets in a business combination. This project will evaluate whether certain intangible assets should be subsumed into goodwill, with a focus on customer relationships and noncompete agreements.

The Board also directed the staff to perform additional research on the amortization of goodwill, with a focus on identifying the most appropriate useful life if goodwill were amortized, and on simplifying the impairment test.

The Board asked the staff to consider the implications of potentially subsuming intangible assets into goodwill in conjunction with its additional research and to consider IASB activities on goodwill and intangible assets in response to its PIR on IFRS 3.

*Tentative Board Decisions Reached to Date (As of November 5, 2014)

The FASB has not begun its initial deliberations for this project. See the minutes below for a summary of discussions to date.

*Next Steps

The staff will perform research and consider feedback received through outreach to determine the best path forward for deliberations.

*Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

The following are links to the minutes for each meeting.

*November 5, 2014 Board Meeting—Updated the Board on research and outreach performed.
March 26, 2014 Board Meeting—Further discussed potential models for subsequent measurement of goodwill for public business entities and not-for-profit entities.
February 12, 2014 Board Meeting—Discussed potential models for subsequent measurement of goodwill for public business entities and not-for-profit entities.
November 25, 2013 Board Meeting—Added project to Board agenda.

Background Information

In 2001, FASB Statement No. 142 Goodwill and Other Intangible Assets replaced APB Opinion No. 17, Intangible Assets (issued in 1970). Opinion No. 17 required amortization of goodwill over its useful life, not to exceed 40 years. Statement 142 eliminated goodwill amortization for financial reporting purposes and instead required that goodwill be tested for impairment at least annually using a two-step process. In the first step, a reporting entity compares the fair value of its reporting units with their carrying value, including goodwill. If the carrying amount of a reporting unit is greater than its fair value, a reporting entity must calculate the implied fair value of goodwill by performing a hypothetical application of the acquisition method as of the date of the impairment test. The goodwill impairment, if any, is equal to the excess of the carrying amount of goodwill over its implied fair value.

In 2011, due to concerns about the cost and complexity of the annual goodwill impairment test, the Board developed an optional qualitative impairment test as a screen for companies to assess whether it is more likely than not that goodwill is impaired before performing the quantitative two-step impairment test (FASB Accounting Standards Update No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment).

In November 2013, the Board endorsed the Private Company Council (PCC) decision to give private companies an alternative to amortize goodwill and simplify the impairment test. For further information on the alternative, see the Summary of Board Decisions . As a result of feedback that indicates that many public business entities and NFPs share similar concerns related to the cost and complexity of the annual goodwill impairment test, the Board added this project to its agenda.

Contact Information

Jennifer Hillenmeyer
Practice Fellow
jhillenmeyer@fasb.org

Victoria McMillen
Postgraduate Technical Assistant
vmmcmillen@fasb.org