NEWS RELEASE 12/20/00
Financial Accounting Standards Board Announces Additional Decisions Relating to the Treatment of Goodwill
Norwalk, CT, December 20, 2000—At today's public meeting, the Financial Accounting Standards Board (FASB) tentatively decided that goodwill recorded on corporate balance sheets, arising from acquisitions completed prior to the date the Board issues its final Statement on business combinations, should no longer be amortized. From the date of issuance, all goodwill would be accounted for using an impairment approach. Under that approach, goodwill would be reviewed for impairment, that is, written down and expensed against earnings, only in the periods in which the recorded value of goodwill is more than its fair value.
In addition, the Board decided to issue for public comment its tentative decisions regarding an impairment-only approach to accounting for goodwill, which was announced on December 6, 2000. The Board plans to issue this revised limited Exposure Draft in the first quarter of 2001 for a 30-day comment period.
Beginning in January of 2001, the Board will address the issue of whether to retain the pooling-of-interests method of accounting for business combinations and related issues. It plans to issue a final Statement that will encompass its decisions on the pooling method and the accounting for goodwill and other purchased intangible assets in the second quarter of 2001.
The Board also reached tentative decisions on the following issues:
- the initial goodwill impairment review (benchmark assessment);
- events that might give rise to a goodwill impairment review;
- accounting for goodwill associated with assets to be disposed of; and
- presentation of goodwill on the balance sheet and goodwill impairment losses on the income statement.
Details on each of the tentative decisions made on the goodwill impairment approach at today's Board meeting will be available on the FASB Web site www.fasb.org on December 21, 2000.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely heavily on credible, transparent, and comparable financial information. For more information about the FASB, visit our Web site at www.fasb.org.