United States

Goodwill alternatives for private companies and not-for-profits

WHITE PAPER

January 2014 (Updated June 2021)

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Our white paper, Goodwill alternatives for private companies and not-for-profits, discusses the following two accounting alternatives provided by the Financial Accounting Standards Board (FASB) to simplify the subsequent accounting for goodwill by private companies and not-for-profit entities (i.e., eligible entities):

  • Overall goodwill accounting alternative, which allows eligible entities to amortize goodwill and use a simplified approach to test goodwill for impairment and to measure any resulting impairment loss. This alternative was initially introduced to private companies by Accounting Standards Update (ASU) 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, and expanded to include not-for-profit entities by ASU 2019-06, 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
  • Goodwill impairment triggering event alternative, which allows eligible entities to perform the goodwill impairment triggering event analysis (and any resulting impairment test) required by ASC 350-20, “Intangibles—Goodwill and Other – Goodwill,” 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 impairment test as of the date during the reporting period on which a triggering event occurred. This alternative was introduced to both private companies and not-for-profit entities by ASU 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events

Our white paper explains the scope and key aspects of each alternative and 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. Each alternative’s effective date, transition and disclosure requirements are discussed in the white paper, as well as some of the considerations involved in an eligible entity’s election of the goodwill alternative (such as the accounting implications if a private company that elected one or both of the alternatives subsequently decides to no longer elect the alternative[s]).

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