The Financial Accounting Standards Board
(FASB) has issued an accounting standard update to simplify how a
firm tests goodwill for impairment.
The amendment was first announced in August
and will allow both public and non-public entities to assess
qualitative factors to determine whether it is necessary to perform
the two-step quantitative goodwill impairment test.
Businesses will no longer be required to
calculate the fair value of a reporting unit unless the firm
determines, through a qualitative assessment, that it is more
likely its fair value is less than its carrying amount.
The new guidance for the standard will include
examples of the types of factors to consider in conducting the
The changes will be effective for annual and
interim goodwill impairment tests performed for fiscal years
beginning on or after 15 December 2011. Early adoption is