Yesterday, the FASB began redeliberations on its proposed Accounting Standards Update Testing Goodwill for Impairment (see Deloitte’s April 25, 2011, Heads Up for details on the proposal). In the redeliberations, the Board reaffirmed the proposed model, under which entities testing goodwill for impairment would have the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step 1 of the goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not greater than the carrying amount, a quantitative calculation would not be needed. The Board also noted that it would perform additional outreach to address implementation concerns raised during the comment letter process.

The FASB further clarified that the scope of the project would be limited to goodwill and would not be expanded to include other indefinite-lived intangible assets. Many constituents had suggested that the Board expand the scope to include other indefinite-lived intangible assets as a means of further reducing cost and complexity in practice. The Board may consider addressing such concerns in a separate project in the future.

The Board also reaffirmed that:

• The proposal’s list of qualitative events and circumstances to be assessed is generally adequate.
• The amendments would apply to both public and nonpublic entities.
• No new disclosures will be required under the amendments.

As proposed, the amendments would be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Board will reassess the effective date after it completes the additional outreach activities.