FASB Approves Simplification Of Goodwill Impairment Testing

At its board meeting on August 10, 2011, the FASB approved an amendment to its standards which will simplify testing related to goodwill impairment. The ASU on this issue, expected to be released in September 2011, will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, and early adoption will be permitted.

The Accounting Standards Update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The guidance also includes examples of the types of factors to consider in conducting the qualitative assessment.

• Click here for the FASB’s news release related to the ASU