FASB aims to ease goodwill accounting for nonprofits
The Financial Accounting Standards Board proposed an accounting standards update aimed at making it easier for nonprofits to account for goodwill and measure some intangible assets.
The proposed ASU builds on recommendations that the Private Company Council had made to FASB in 2014 to reduce the cost and complexity of accounting for goodwill and measuring certain identifiable intangible assets for private companies; the board later released two standards incorporating those recommendations.
“Stakeholders subsequently told us that these two private company alternatives would also benefit not-for-profit organizations — as the benefits of current accounting for goodwill and identifiable intangible assets in a business combination did not justify the costs,” said FASB Chairman Russell Golden, in a statement. “This proposed standard simply extends the scope of the two private company alternatives to not-for-profits, which will enable them to recognize fewer items as separate intangible assets in acquisitions and to account for goodwill in a more cost-effective manner.”
The ASU would allow nonprofits to forego testing goodwill for impairment annually at the reporting unit level; instead, they would:
- Amortize goodwill over 10 years or less, on a straight-line basis;
- Test for impairment upon a triggering event;
- Have the option to elect to test for impairment at the entity level; and,
- Have the option to subsume certain customer-related intangible assets and all non-compete agreements into goodwill.
FASB is looking for comments on the proposed ASU by Feb. 18, 2019.