Accounting & Tax

FASB Shows Unanimous Support for Business Combinations Project

Final vote regarding goodwill and intangible assets is scheduled by June 30.
Craig SchneiderMay 23, 2001

The Financial Accounting Standards Board on Tuesday unanimously supported the issuance of two final statements that detail the proposed new M&A accounting standards. The vote signals the conclusion of months of redeliberations on the subject.

A formal vote over the final approval of the statements Business Combinations and Goodwill and Intangible Assets is slated for the end of June. Staff members were directed with Tuesday’s vote to draft the changes to FASB’s 1999 proposal on business combinations and intangible assets.

The rulemaking process comes to its end after the issuance of several separate documents, public hearings and analysis of hundreds of comment letters received since 1996 from a broad constituency, including senior financial executives. “FASB has worked diligently on this project, and we look forward to finalizing the statements,” said FASB Chairman Edmund Jenkins in a prepared statement.

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The Statement on Business Combinations will require use of the purchase method of accounting for all business combinations initiated after June 30, 2001, thereby eliminating use of the pooling-of-interests method. It provides new criteria that determine whether an acquired intangible asset should be recognized separately from goodwill.

The Statement on Goodwill and Intangible Assets will provide guidance on how to account for goodwill and intangible assets after the acquisition is complete. Specifically, goodwill will no longer be amortized. Instead, it will be tested for impairment.

For more on the effective dates of the standards from the FASB Web site, click here .

More CFO.com related articles:

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“Why J&J Jumped to Purchase Accounting”

“FASB May Delay Effective Date for New M&A Standards”

“Will FASB Finish on Time?”

“Why Wachovia is Banking on Purchase Accounting”

“Why Pepsi Loves Pooling”

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