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FASB Declares that Step 2 Goodwill Impairment Analysis Not Required

FASB Declares that Step 2 Goodwill Impairment Analysis Not Required

by sevaa

By February 2, 2017September 18th, 2021Insights

In an effort to simplify accounting, the Financial Accounting Standards Board (FASB) has eliminated Step 2 from the goodwill impairment test, according to a statement issued on January 26, 2017.  Accounting Standards Update No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment affects public business entities and other entities that have goodwill on their financial statements and have not elected the private company alternative for measuring goodwill.

In essence, an entity will continue to perform annual or interim analyses of goodwill, but instead of analyzing its individual assets and liabilities, an entity will recognize an impairment charge to goodwill for the amount by which the carrying amount exceeds the reporting unit’s fair value under Step 1.  However, in no case will the impairment charge be greater than the carrying amount of the goodwill the reporting unit reports.

Read the full article here.

Public business entities that file with the SEC are required to adopt the new standard for goodwill impairment tests in fiscal years beginning after December 15, 2019. Public entities that do not file with the SEC should adopt the standard in fiscal years beginning after December 15, 2020.  All other entities are required to do so by December 15, 2021.  Early adoption is permitted for goodwill impairment testing dates of January 1, 2017 or later.

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For more information on the updated goodwill impairment testing standard, please contact Gina Miller by calling 770.396.2200.