Clarification about the effective date for goodwill impairment simplification
Defining Issues | April 2017
Some companies need to apply the same impairment model consistently to all goodwill impairment tests performed within a fiscal year.
In informal discussions with KPMG, the FASB staff have clarified certain aspects of the effective date of the simplified goodwill impairment test. Companies need to apply the same impairment model consistently to all goodwill impairment tests performed within a fiscal year, except for interim tests performed as of a date before January 1, 2017.
Applicability
ASU 2017-04
- Company with goodwill on its balance sheet
Relevant dates
Key Impacts:
- In informal discussions with KPMG, the FASB staff have clarified certain aspects of the effective date of the simplified goodwill impairment test
- All companies may early adopt the standard for goodwill impairment tests with measurement dates on or after Jan. 1, 2017
- Companies need to apply the same impairment model consistently to all goodwill impairment tests performed within a fiscal year, except for interim tests performed as of a date before Jan. 1, 2017
Examples
EXAMPLE 1
Facts
- Fiscal year-end: Sep. 30, 2017
- Annual impairment test date: July 1
- Company performed a two-step interim impairment test as of Nov. 30, 2016 because of a triggering event
Analysis
Company may early adopt the simplified goodwill impairment test for the annual impairment test on July 1, 2017 even though it performed a two-step interim test during the same fiscal year. This is because the interim test was performed as of a date before Jan. 1, 2017.
EXAMPLE 2
Facts
- Same facts as Example 1, except that the two-step interim impairment test was performed as of Feb. 1, 2017
Analysis
The company is prohibited from early adopting the simplified impairment test for its annual goodwill impairment test on July 1, 2017. This is because it needs to apply the same impairment model to all impairment tests within the same fiscal year, unless an interim test was performed before Jan. 1, 2017. In this example, the interim test was performed after Jan. 1, 2017.
EXAMPLE 3
Facts
- Fiscal year-end: Dec. 31, 2016
- Annual impairment test date: Oct. 31
- Most recent annual impairment test indicated that a reporting unit failed Step 1 but passed Step 2
Analysis
- For the quarter ended Mar. 31, 2017, the company needs to consider whether the previously failed Step 1 continues to be an impairment indicator
- If the company wants to early adopt the simplified goodwill impairment test for the year ended Dec. 31, 2017, it needs to perform any interim goodwill impairment tests using the new guidance
- If the new guidance is not used for the quarter ended Mar. 31, 2017, the company is prohibited from adopting the new guidance for the year ended Dec. 31, 2017
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