What are the potential consequences of a change from the current impairment model to goodwill amortization? That’s just one of the questions asked in a series of three articles designed to explore whether principles underlying business valuations are compatible with the concept of goodwill amortization. The first article in the series, “Is Goodwill a Wasting Asset?” examines whether goodwill is economically a wasting asset and, if so, whether the life and implicit decline in value can be reasonably estimated and supported.

In the U.S., the issue of annual impairment testing versus amortization of goodwill is being revisited with the Financial Accounting Standards Board (FASB) issuance of an Invitation to Comment (ITC) on how to account for certain identifiable intangible assets acquired in a business combination. Private companies and not-for-profit organizations got relief from the rules after struggling with the burden of annual testing. In preliminary outreach with public-company stakeholders, the FASB received mixed feedback “indicating that the benefit of certain intangible asset and goodwill impairment information might not justify the cost of preparing and auditing that information,” according to the 34-page ITC. Comments on the ITC are due by October 7.