We have updated our white paper, Goodwill alternatives for private companies and not-for-profits, to reflect the new goodwill accounting alternative provided by the Financial Accounting Standards Board in Accounting Standards Update 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events. The new alternative allows private companies and not-for-profit entities (i.e., eligible entities) to perform the goodwill impairment triggering event analysis (and any resulting required impairment test) as of the end of each reporting period, whether an interim or annual reporting period, instead of performing that analysis throughout the reporting period and any resulting required impairment test as of the date during the reporting period on which a triggering event occurred. The updated white paper should be read to understand how the alternative should be applied and the implications of applying the alternative.
In addition to the new alternative, our white paper also covers the preexisting goodwill alternative that allows eligible entities to amortize goodwill and use a simplified approach to test goodwill for impairment and to measure any resulting impairment loss. Our white paper explains the scope and key aspects of each alternative, summarizes how the election of each alternative affects an eligible entity’s subsequent accounting for goodwill in comparison to the guidance that would otherwise be applicable, discusses each alternative’s effective date, transition and disclosure requirements and highlights some of the considerations involved in an eligible entity’s election of one or both goodwill alternatives (such as the accounting implications if a private company decides to cease its election of an alternative).
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