On May 12, 2016, FASB issued the proposed ASU No. 2016-230 Intangibles – Goodwill and Other (Topic 350): Simplifying Accounting for Goodwill Impairment. The proposed ASU is Phase 1 of a two phase project. The FASB project is to determine whether similar amendments in ASU 2014-02 (alternative accounting treatment for subsequent measuring of goodwill by private companies) should be implemented for other entities, including public business entities and nonprofits.
The object of Phase 1 is to simply the subsequent measurement of goodwill by removing Step 2 of the impairment test. The amendments of the ASU would allow entities to perform its annual, or any interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. However, entities would still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.
Additionally, FASB is proposing to remove the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if the qualitative test fails, to perform Step 2 of the impairment test. This allows the same impairment assessment to apply to all reporting units.
The proposed ASU also includes amendments to the Overview and Background sections of the ASC.
Comments can be submitted to FASB until July 11, 2016.