FASB Simplifies Measurement of Goodwill Impairment

Intangibles — Goodwill and Other (Topic 350), Accounting Standards Update (ASU) 2017-04, Simplifying the Test for Goodwill Impairment was recently issued by the Financial Accounting Standards Board (FASB or the Board). For entities that have not adopted the Private Company Council (PCC) accounting alternative, it eliminates step 2 of the goodwill impairment test which had required a hypothetical purchase price allocation.

Under the new guidance, goodwill impairment will now require only a one-step approach and be equal to the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.