The CFA Institute (CFAI) recently submitted its lengthy comment letter (41 pages) on the FASB’s Invitation to Comment (ITC) on how to account for certain identifiable intangible assets acquired in a business combination. The FASB is looking at whether annual goodwill impairment tests should be done away with for public companies and whether to subsume other assets into goodwill. The CFAI expresses serious concerns about the FASB’s thinking on this matter and the possible reversion back to amortization. The CFAI was very much against the FASB’s Private Company Council allowing private companies to amortize goodwill (see their position paper on that) and is very much against this idea for public companies. The organization has stated that it feels that the FASB proposal will go through unless there is a little bit of a “revolution” from the user and investor community.
The valuation community is united in its opinion that, from a user perspective, the benefits of the transparency and information the current impairment model provides outweigh the costs. The cost-benefit issue was what triggered the FASB to revisit this issue in the first place. A coordinated effort is underway in the business valuation profession to continue to provide feedback to rule makers and to educate users on this important issue. For example, the Appraisal Issues Task Force (of The Appraisal Foundation) recently invited representatives of the FASB, SEC, and PCAOB to a meeting to discuss this matter.
Please let us know
if you have any comments about this article or enhancements you would like to see.