United States

Proposed accounting alternatives for not-for-profit entities


The Financial Accounting Standards Board recently issued a proposed Accounting Standards Update (ASU) that, if finalized, would extend the scope of two private company accounting alternatives to not-for-profit entities - the accounting for goodwill and the accounting for identifiable intangible assets in a business combination. Under the proposed ASU, instead of testing goodwill for impairment annually at the reporting unit level, a not-for-profit entity that elects the accounting alternative would:

  • Amortize goodwill on a straight-line basis over 10 years, or less than 10 years if the not-for-profit entity demonstrates that a shorter useful life is more appropriate
  • Have the option to elect to test for impairment at either the entity level or the reporting unit level
  • Test goodwill for impairment when a triggering event occurs that indicates that the fair value of the entity (or reporting unit) may be below its carrying amount

Also, in a business combination, a not-for-profit entity would have the option to subsume into goodwill and amortize certain customer-related intangible assets and all non-compete agreements.

The proposed ASU, Intangibles - Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities, is available for comment until February 18, 2019.