The FASB has issued ASU 2021-03, Intangibles – Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events to provide private companies and not-for-profit entities with the option to perform the identification and evaluation of a triggering event for goodwill impairment as of the end of the reporting period. This ASU can be used for fiscal years beginning after December 15, 2019 for both interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021.  The ASU cannot be applied retrospectively to interim financial statements already issued in the year of adoption.

This change no longer requires private companies and not-for-profit entities to monitor and evaluate goodwill impairment triggering events throughout the fiscal year. Instead, these entities are able to evaluate the facts and circumstances as of the end of the reporting period to determine whether it is more likely than not that goodwill is impaired. The FASB believes that this ASU will reduce the cost and complexity of the impairment evaluation by aligning the triggering event date with an entity’s reporting period which will be beneficial for these entities as the facts and circumstances at the date of the triggering event may be substantially different from those that exist as of the end of the financial reporting period. It is anticipated that this ASU will also provide readers more useful information, as the evaluation will include facts and circumstances as of the end of the reporting period.

Private companies and not-for-profit entities are allowed to apply a one-time transition election to adopt the amendments prospectively as of the effective date on March 30, 2021.

The full text of ASU 2021-03 is available here.

^{Readers should not act upon information presented without individual professional consultation.}