FASB Issues New Guidance on Goodwill Accounting for NonprofitsJune 24, 2019
Nonprofits, the Financial Accounting Standards Board (FASB) has issued an accounting standards update (ASU) that will reduce the cost of goodwill accounting. Learn more here.
Attention nonprofits: The Financial Accounting Standards Board (FASB) has issued an accounting standards update (ASU), effective immediately, which will reduce the cost of accounting for goodwill and measuring certain identifiable intangible assets for nonprofit organizations.
More about the ASU
Check out our blog, FASB Proposes New Guidance on Goodwill Accounting for Nonprofits. In response to concerns expressed by private companies and their stakeholders about the complexity of the goodwill impairment test and the accounting for certain identifiable intangible assets, FASB issued ASU 2014-02 in 2014. It contains two private company alternatives to the traditional method of goodwill accounting:
- A private company can amortize goodwill on a straight-line basis over a period of 10 years, or
- A private company can apply a simplified impairment model to goodwill.
In ASU 2019-06 Intangibles—Goodwill And Other (Topic 350), Business Combinations (Topic 805), And Not-For-Profit Entities (Topic 958): Extending The Private Company Accounting Alternatives On Goodwill And Certain Identifiable Intangible Assets To Not-For-Profit Entities, FASB extended the scope of the private company alternatives to include nonprofits after hearing from stakeholders that this simplification would also benefit tax-exempt organizations. This will enable them to recognize fewer items as separate intangible assets in acquisitions and to account for goodwill in a more cost-effective way.
Questions on the update? Reach out to any member of our Not-for-profit Services Team.