Accounting for Goodwill at Private versus Other Companies: Amortize, Impair, or Write Off

This article documents increased diversity in financial accounting practice. The Financial Accounting Standards Board (FASB) standard-setting process for the Accounting Standards Update (ASU) 2014-18 is used as documentation. The FASB ASU 2014-18 was approved by a slim margin of four to three of the FASB members. This indicates continuing controversy around accounting for goodwill that relates to the public interest goal of similar accounting for similar transactions and events. This article analyzes the content within the 52 Comment Letters submitted in response to 18 questions asked by the Private Company Council (PCC) that lead to the promulgation of the FASB ASU 2014-18. Private companies are to include non-marketable intangibles in the account goodwill that non-private companies are to continue measure and report separate from goodwill. Plus private companies are allowed to either amortize or test for impairment in measuring and reporting goodwill. Non-private companies are to test for impairment. Non-private companies do not have the option of using amortization as part of the measurement and reporting process regarding goodwill. This diversity in measuring and reporting goodwill decreases progress toward the public interest goal of comparability of financial reports. Comparability is a significant quality thought to improve decision usefulness of information.