FASB changes direction on goodwill
The US Financial Accounting Standards Board (FASB) has unanimously agreed to scrap a four-year project revising how companies account for goodwill, dropping it from FASB’s technical agenda. Goodwill is a measure of intangible assets transferred when one company acquires another, such as brand recognition and intellectual property. Understanding its value over time is a complex issue.
Currently, under US Generally Accepted Accounting Principles (GAAP) – as well as International Financial Reporting Standards (IFRS) – companies must annually recalculate the value of the goodwill assets they report, to determine whether any impairment has occurred. The cancelled FASB project had considered simplifying this requirement, allowing companies to amortise goodwill, writing it down to zero on a linear basis over a fixed time period. FASB Chair Richard Jones commented that the case for this very significant change did not stack up.
What particularly interests us at XBRL International about this decision is that it is clear that FASB took careful note of the analysis carried out by CFA Institute with Calcbench, which pulled together goodwill disclosures in the notes to the financial statements published by US public companies in Inline XBRL. Good, evidence-based decision making!
Read more here.
