FASB recently issued an Exposure Draft related to potential changes to the treatment of goodwill and certain other intangible assets for not-for-profit entities that would allow not-for-profit entities the same accounting alternatives made available to private for-profit companies.

Private for-profit companies were given the option via ASU 2014-18 and ASU 2014-02 to elect accounting alternatives related to reducing the amount of intangible assets required to be specifically identified in a business combination and gave the companies the ability to amortize goodwill over a period of 10 years. These standards updates were made in order to reduce the amount of time and costs it took for private companies to value hard to value intangible assets and complete an annual impairment evaluation for goodwill. When these standards were updated, not-for-profit entities were not considered for inclusion for the accounting alternative options, primarily because the push for these standards changes came from the Private Company Council.

Under the goodwill accounting alternative included in the Exposure Draft, not-for-profit entities would be allowed to elect to amortize goodwill over 10 years or less than 10 years if the entity demonstrates that a shorter useful life is more appropriate (ASC 350-20-35-63). Goodwill would be required to be evaluated for impairment when a triggering event occurs instead of annually or at each reporting date. The Exposure Draft would also provide the option to elect to test for impairment at the entity level. Under the intangible valuation in business combinations alternative (ASC 805-20-25-30), any customer-related intangible assets (including customer lists or customer relationships) and any noncompetition agreements would not be required to be separately identified from goodwill. A not-for-profit entity would have the option of electing the alternative in Topic 350, and would not be required to elect the alternative in Topic 805. However, if the entity elects the alternative in Topic 805 in a new business combination the entity would be required to elect the alternative in Topic 350.

This Exposure Draft does not indicate when the effective date would be if the Exposure Draft is issued as a new standard. Questions open for comment for the Exposure Draft have requested comment if a similar indefinite effective date would be appropriate for not-for-profit entities as is utilized by for-profit private companies. As the Exposure Draft is currently written, early application would be permitted.

Comments on the Exposure Draft are due by February 18, 2019. The full text of the Exposure Draft is available here.

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