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Concern that US goodwill proposal may impede international harmonisation

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03 May 2001

In February, FASB issued a revised exposure draft on business combinations in which it proposed a model that calls for use of the purchase method for all business combinations, with goodwill not amortised but, rather, tested for impairment.

FASB has just released an analysis of the comments on the exposure draft. While many respondents agreed with the basic proposal that goodwill is a non-wasting asset, most respondents disagreed with the details of the goodwill-impairment model. A sizeable group of respondents, primarily auditors and accounting academicians, disagreed with the basic model. A principal concern expressed by this group is that "an impairment-only accounting method for goodwill moves U.S. GAAP further from international harmonization". Business Combinations is one of the IASC projects handed over to the new IASB.

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