FASB’s got mail, but not necessarily fan mail.
Responses to its revised Exposure Draft (“ED”), Business Combinations and Intangible Assets — Accounting for Goodwill are starting to trickle in, and the Committee on Corporate Reporting (CCR) of Financial Executives International (FEI) is one of the first to offer some constructive criticism.
FEI is a membership driven professional association for senior financial executives representing 15,000 individuals.
The following is the first of seven summarized CCR concerns detailed in a letter sent earlier this week:
- “We believe that the Board needs to clarify the definition of intangible assets. While adding the concepts of separability, legal/contractual rights and ability to sell to the definition is helpful, the ED then muddies the waters significantly by stating that such intangibles need not meet the latter requirement individually — they would still meet the definition if they could be sold as part of a group of related assets. We understand that this nuance is intended to capture core deposit intangibles but we suspect that it will sweep in other intangibles as well that really should be part of goodwill.”
For more insight into the confusion on intangibles, read “FASB Goodwill Proposal Confounds Experts”.
Other FEI concerns address:
- A need to clarify those intangibles with indefinite lives
- Arriving at an acceptable approach to the level of the reporting unit
- Detailed and onerous requirements for benchmark assessment
- High costs of regularly engaging in outside valuation experts to determine fair value of goodwill
- The potential to materially distort the gain or loss on a unit being sold under current methodology
- Transition requirements precluding accounting change treatment for inevitable impairments
For the full FEI letter including detailed responses and its recommended solutions, click here.
The comment period for the revised ED expires on March 16.