FASB Makes Proposal to Simplify Goodwill Impairment Accounting

At the January 6, 2016 Board Meeting of the FASB, the Board reaffirmed its earlier decision to simplify goodwill impairment accounting and directed the staff to draft a proposal. Under the proposal, an entity would record an impairment charge based on Step One in the current two-step impairment test.

• If a reporting unit’s carrying value exceeds its fair value, the entity would record an impairment charge to goodwill equal to the difference between the two amounts.
• The proposal would eliminate today’s requirement to calculate goodwill impairment by comparing the fair value of goodwill (as estimated by performing a hypothetical application of a purchase price allocation under Accounting Standards Codification Topic 805) with its carrying value.