FASB extends GAAP alternatives to not-for-profits

By Ken Tysiac

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.

SPONSORED REPORT

Implementing a global statutory reporting maturity model

Assess your organization's capabilities and progress toward an ideal state of global statutory reporting. Sponsored by Workiva.

100th ANNIVERSARY

Black CPA Centennial, 1921–2021

With 2021 marking the 100th anniversary of the first Black licensed CPA in the United States, a yearlong campaign kicked off to recognize the nation’s Black CPAs and encourage greater progress in diversity, inclusion, and equity in the CPA profession.