FASB Makes Proposal to Simplify Goodwill Impairment Accounting
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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.