Not-for-profit financial statement preparers will be able to take advantage of two GAAP alternatives that FASB originally developed for private companies.
FASB issued a standard Thursday that will make not-for-profits eligible for the private company alternatives on accounting for goodwill and accounting for identifiable intangible assets in a business combination.
The alternatives for private companies were issued in 2014 as a result of work that originated with the Private Company Council. The standard issued Thursday will enable not-for-profits to recognize fewer items as separate intangible assets in acquisitions and to account for goodwill in a more cost-effective manner. This can make accounting less complicated and less costly for not-for-profits.
Instead of testing goodwill for impairment annually at the reporting-unit level, a not-for-profit that elects the accounting alternative will:
- 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.
A not-for-profit also has the option to subsume certain customer-related intangible assets and all noncompete agreements into goodwill, which it subsequently is required to amortize.
The amendments took effect upon the issuance of the standard, and not-for-profits have the same open-ended effective date and unconditional one-time election that private companies have.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.