Accounting & Tax

FASB Board To Deal With Goodwill

Haven't had enough of goodwill amortization, have you? Well, neither has FASB.
Craig SchneiderDecember 19, 2000

On Wednesday, FASB will hold an open meeting to discuss several accounting standards topics, including issues relating to the Board’s pending decision to account for goodwill under an impairment-only approach.

The agenda for the 8:30 am meeting includes:

  • Business combinations
  • FASB Statement 140 implementation
  • Financial instruments: derivatives implementation
  • FASB technical plan

But the first topic, relating to FASB Exposure Draft, Business Combinations and Intangible Assets is most in the public eye. Earlier this month, the regulatory body proposed an end to the practice of automatically recording goodwill and amortizing it for up to 40 years. Instead, companies would amortize the goodwill only if and when they determine that the value of goodwill is impaired.

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There’s still plenty of debate on the topic, according to Tim Lucas, FASB director of research and technical analysis.

“The meeting tomorrow will be very interesting,” Lucas tells CFO.com. “My sense is some board members are leaning toward a general approach that would say let’s stop amortizing, but we also have the issue of previously recognized other intangibles.”

In CFO.com’s last article on this topic, “Will Christmas Come Early for Corporate America?”, Lucas said canceling companies’ remaining merger-related write-offs for goodwill would relieve comparability concerns. However, he hedges his opinion by saying that he does not know exactly what The Board will ultimately decide.

FASB will also discuss what events might give rise to a goodwill impairment review and what additional guidance it requires. Under the most recent proposal, FASB would require companies to estimate the fair value for a business unit, something it does not automatically do. “There will be questions of whether that’s practical and whether auditors will be able to audit that,” Lucas says.

For example, while it may be relatively easy for a company today to put together documents on how fair value is measured, materials may be harder to come by for older transactions.

The Board will also need to determine whether any changes to the impairment approach will call for additional public comment, a decision that Lucas says could delay final rulings by as much as a year.

That’s where the 2001 technical plan comes into play. The Board developed this schedule to create a plan of attack for all of its projects and creates expected completion dates. “We’re not nearly done,” Lucas says, “We’re hopefully going to be done in the goodwill part of it, which means we can start working on the pooling part of it, but we’re not done.”

For a FASB meeting calendar, click here.

How to Participate

To monitor the discussions by telephone, interested individuals can call 1-800-846- 4717. Listeners will be charged $0.75 per minute and VISA, MasterCard, American Express, or Discover Card is required. Questions about the telephone hookup can be directed to (203) 847-0700, ext. 389.

Handouts distributed to the audience at a telephone broadcast meeting, if any, can be obtained by fax a half hour before the meeting by calling (203) 847-0700, menu item 14. Once you have pressed 14, press option 2, and then press 658.