Topic 350, Intangibles—Goodwill and Other
(Topic 350), currently requires an entity that has not elected the
private company alternative for goodwill to perform a two-step test
to determine the amount, if any, of goodwill impairment. In Step 1,
an entity compares the fair value of a reporting unit with its carrying
amount, including goodwill. If the carrying amount of the reporting
unit exceeds its fair value, the entity performs Step 2 and compares
the implied fair value of goodwill with the carrying amount of that
goodwill for that reporting unit. An impairment charge equal to the
amount by which the carrying amount of goodwill for the reporting
unit exceeds the implied fair value of that goodwill is recorded,
limited to the amount of goodwill allocated to that reporting unit.
To address concerns over the cost and complexity
of the two-step goodwill impairment test, the amendments in this Update
remove the second step of the test. An entity will apply a one-step
quantitative test and record the amount of goodwill impairment as
the excess of a reporting unit's carrying amount over its fair value,
not to exceed the total amount of goodwill allocated to the reporting
unit. The new guidance does not amend the optional qualitative assessment
of goodwill impairment.
This Update is the final version of Proposed
Accounting Standards Update 2016-230—Intangibles—Goodwill and Other (Topic 350)—Simplifying
the Accounting for Goodwill Impairment, which has been deleted.
Issued: January 26, 2017