FASB proposes extending 2 GAAP alternatives to not-for-profits

By Ken Tysiac

FASB is proposing that not-for-profits be permitted to use two GAAP alternatives that are currently available only to private companies.

A proposed Accounting Standards Update issued Thursday would allow not-for-profits to elect the private company alternatives on accounting for goodwill and accounting for identifiable intangible assets in a business combination.

Under the proposal, instead of testing goodwill for impairment annually at the reporting unit level, a not-for-profit that chooses the GAAP alternative would:

  • Amortize goodwill over 10 years or less, on a straight-line basis;
  • Test for impairment upon a triggering event;
  • Have the option to elect to test for impairment at the entity level; and
  • Have the option to subsume certain customer-related intangible assets and all noncompete agreements into goodwill.

FASB Chairman Russell Golden said the proposal was developed in response to concerns from stakeholders that the costs for not-for-profits of the current accounting for goodwill and intangible assets in a business combination were not justified by the benefits.

“This proposed standard … will enable them to recognize fewer items as separate intangible assets in acquisitions and to account for goodwill in a more cost-effective manner,” Golden said in a news release.

Comments can be submitted through Feb. 18 at FASB’s website.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

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