FASB Requests Input on Accounting for Intangible Assets and Goodwill

On July 9, 2019, the Financial Accounting Standards Board (FASB) issued an invitation to comment (ITC), requesting input on the accounting for certain identifiable intangible assets acquired in a business combination and subsequent accounting for goodwill.

There are already accounting alternatives for private and not-for-profit companies, but FASB has received mixed feedback from users, preparers, and practitioners on whether the benefits justify the costs for public entities. Therefore, the FASB staff is seeking further input to inform the Board’s future deliberations about whether a change to financial reporting is warranted and whether cost-effective solutions that maintain or improve decision usefulness are feasible.

In recent years, the Board has received feedback that goodwill impairment charges are often a lagging indicator of the economic factors that lead to goodwill impairment. Some users have also voiced concern that measures of certain identifiable intangible assets are not verifiable, comparable, or distinguishable from goodwill and don’t necessarily provide useful information for investors. Conversely, some users indicated that the currently reported information is helpful in that impairment charges confirm beliefs about an under-performing acquisition. It has also been expressed that the goodwill charge also holds management accountable for poor capital allocation decisions, despite that not being the purpose of a goodwill impairment test. The Board has also stated concern surrounding extending the alternatives to public entities because of potential comparability issues. 

Insight is requested to gauge:

  1. Whether changes to financial reporting should be addressed by the Board
  2. Whether and how to proceed with simplifications or improvements to these topics
  3. How optionality in the accounting for intangible assets and goodwill is viewed

Stakeholders are asked to comment on the ITC by October 7, 2019 by one of the following methods:

  • Submitting comments through the electronic feedback form
  • Emailing comments to director@fasb.org, File Reference No. 2019-720
  • Sending a letter to “Technical Director, File Reference No. 2019-720, FASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.”

The invitation to comment can be reviewed in full here.