Audit Alert: FASB Publishes Guidance on Testing for Goodwill Impairment
9/20/2011
The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment, which simplifies how public and non-public entities test goodwill for impairment.
These amendments would allow organizations to assess qualitative factors to determine whether it is “more likely than not” the fair value of the reporting unit is less than its carrying amount. Doing so will help determine whether it is necessary to perform the two-step goodwill impairment test described in FASB ASU Topic 350.
“More likely than not” is defined by FASB by having a likelihood of “more than 50 percent.”
According to FASB, “The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.
For more information about this or other compliance issues, please contact your J.H. Cohn engagement partner at 877-704-3500.