Accounting for Goodwill: Simplification Adds Complexity

Abstract

This article includes a brief history of accounting for Goodwill leading to research results regarding potential unresolved measuring and reporting issues. The debate over accounting goodwill has been ongoing for decades. The standards have been revised over these decades. Amortization of Goodwill over no more than 40 years was allowed starting in the 1970s. The Financial Accounting Standards Board (FASB) issued Statement 142 in 2001 eliminating the option to amortize and required the impairment method be applied to Goodwill. The change for simplification as promulgated in Accounting Standards Update (ASU) 2017-04 Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment was not welcomed by all. The lack of agreement indicates that more revisions will occur.  This article reports research focused on examining the decision and views of various companies regarding the ASU 2017-04 guidance based on comment letters. The comment letters are available on the FASB website (FASB, 2016a).