FASB approves standard to simplify testing goodwill for impairment

On Wednesday, the Financial Accounting Standards Board (FASB) approved a revised accounting standard intended to simplify how an entity tests goodwill for impairment.

An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The guidance also includes examples of the types of factors to consider in conducting the qualitative assessment.

The amendments will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, though early adoption will be permitted.