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News & opinion

1 NOV 2019

FASB seeks comments about goodwill

The Financial Accounting Standards Board (FASB) released an invitation to comment about identifiable intangible assets and subsequent accounting for goodwill. The FASB is obtaining feedback from various stakeholders whether to modify the recognition of intangible assets in a business combination and to change the subsequent accounting for goodwill.

In regard to accounting for goodwill, the FASB is contemplating whether to amortize goodwill and to modify the goodwill impairment test. The possible approaches to account for goodwill include:

1. an impairment-only model,

2. an amortization model combined with an impairment test, and

3. an amortization-only model.

Furthermore, the impairment test utilized under the first two models may be revised or preserved as is.

In addition, the FASB is looking into four approaches regarding the recognition of intangible assets as such:

1. Extend the private company alternative to subsume certain customer-related intangibles and all noncompete agreements into goodwill

2. Apply a principles-based criterion for intangible assets

3. Subsume all intangible assets into goodwill

4. Do not amend the existing guidance

Over the past few months, RICS has collected feedback on the invitation to comment from professionals that represent nearly 20 valuation practices in the US and the UK. Earlier this month, RICS had submitted its comments on the FASB document regarding potential changes being considered in this area of financial reporting. Furthermore, RICS staff will participate in a roundtable on Friday, November 15, 2019, to discuss the topics presented in the invitation to comment.

We believe this will be an important roundtable. Any significant changes resulting from the discussion related to the identifiable intangible assets and subsequent accounting for goodwill may have global implications and impact fair value measurements of other assets such as real estate, machinery & equipment, and financial instruments.

The Financial Account Standards Board have released invitation to comment about identifiable intangible assets and subsequent accounting for goodwill

RICS is committed to working with stakeholders from across all related professions to strengthen transparency in support of the public interest. An update on this topic will be provided after the FASB roundtable.

  • Article authored by Steve Choi and Michael Zuriff