FASB Drafts Formal Proposal to Simplify Goodwill Impairment

On May 12, 2016, the FASB drafted a formal proposal to eliminate Step Two of the current goodwill impairment test – which requires a hypothetical purchase price allocation to calculate impairment loss. Under the proposal (which addressed discussions at prior FASB meetings), goodwill impairment loss would instead by measured by the amount by which a reporting unit’s fair value is lower than its carrying value. Per the proposal, all other goodwill impairment guidance would remain unchanged.

• See the FASB Exposure Draft for further details.