In addition to using this new guidance at year-end, entities will be able to utilize the new guidance any time financial statements are issued which includes interim periods. This represents an improvement from the original proposal which would have only allowed entities that reported financial information on an annual basis to utilize the alternative.
Once issued in final form, the change will no longer require entities to monitor and evaluate goodwill impairment triggering events throughout the fiscal year. Instead entities will be able to evaluate the facts and circumstances as of the reporting date to determine whether it is more likely than not that goodwill is impaired. The FASB believes that this will reduce the cost and complexity of the impairment evaluation by aligning the triggering event date with an entity’s reporting date which will be beneficial for entities as the facts and circumstances at the date of the triggering event may be substantially different from those that exist at the financial reporting date. It is anticipated that this update will also provide readers more useful information, as the evaluation would include facts and circumstances at the reporting date.
Entities will be allowed to apply a one-time transition election to adopt the amendments prospectively after the effective date.
Readers should not act upon information presented without individual professional consultation.
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As reported in the tentative decisions from its February 10, 2021 meeting, the FASB recently voted 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 at the reporting date. Because this decision is currently considered tentative, the described alternative will not be available for entities to use until the issuance of a final Accounting Standards Update.