Not-for-Profit Proposal to Allow Goodwill Amortization

By Keiter CPAs

Not-for-Profit Proposal to Allow Goodwill Amortization

In recognizing the differing reporting needs of private versus public companies, the Financial Accounting Standards Board (FASB) formed an advisory council known as the Private Company Council (PCC) tasked with giving consideration to areas of generally accepted accounting principles (GAAP) that create burdensome reporting requirements without resulting in useful information for the users of those financial statements. One of those areas was determined to be Goodwill and with Accounting Standards Update (ASU) 2014-02, Intangibles – Goodwill and Other (Topic 350): Accounting for Goodwill, a Consensus of the Private Company Council private companies were allowed to begin amortizing goodwill on a straight-line basis over a maximum of 10 years. Private companies that amortize goodwill only have to test for impairment when certain triggering events occur, such as a decline in the broad economy, changes in key management, declines in business lines, and so on. This removes the requirement to perform complicated quantitative impairment calculations so long as no triggering events have been identified. FASB member Gary Buesser speaking about the calculation of Goodwill impairment stated, “You have something that is costly and complex for companies to evaluate and provides zero or next-to-zero content of information to investors.”

FASB decided at its October 24, 2018, meeting to issue a proposed amendment to U.S. GAAP to allow not-for-profit organizations to follow the same guidance as ASU 2014-02 and begin amortizing goodwill acquired during an acquisition. The proposal is being followed-up by FASB releasing a preliminary document called an invitation to comment to take a more extensive review of the accounting for goodwill. After a brief comment period, FASB will then review the responses and it is anticipated that not-for-profits will be granted some relief over accounting for Goodwill.

Questions about this topic or other not-for-profit accounting changes? Contact your Keiter representative or Email | 804.747.0000

Additional not-for-profit accounting news and information

© 2018 Thomson Reuters/Tax & Accounting. All Rights Reserved.

Share this Insight:

About the Author

Keiter CPAs

Keiter CPAs

Keiter CPAs is a certified public accounting firm serving the audittax, accounting and consulting needs of businesses and their owners located in Richmond and across Virginia. We focus on serving emerging growth businesses and companies in the financial servicesconstructionreal estatemanufacturingretail & distribution industries and nonprofits. We also provide business valuations and forensic accounting servicesfamily office services, and inbound international services.

More Insights from Keiter CPAs

The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


Contact Us