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In December 2018, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) related to extending the private company accounting alternatives on goodwill and certain intangible assets to not-for-profit (NFP) entities.

In 2014, the FASB issued ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, and ASU No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination, which simplified the subsequent accounting for goodwill and the accounting for certain identifiable intangible assets in a business combination for private companies. These ASU’s were in response to concerns expressed by private companies about the cost and complexity associated with the subsequent accounting for goodwill and the measurement of certain intangible assets.

The FASB acknowledged that the concerns the ASU’s addressed were not limited to private companies and added to its agenda projects potentially extending the accounting alternatives to other entity types. As a result, the noted proposed ASU was issued. The amendments in this proposed ASU help to simplify a NFP entity’s accounting for goodwill and certain intangibles assets without significantly reducing information available to users of NFP financial statements.

Accounting Alternative

The proposed ASU merely extends the scope of the accounting alternatives provided in ASU’s No. 2014-02 and No. 2014-18 to NFP entities and does not amend the related guidance.

Instead of testing goodwill annually for impairment at the reporting unit level, the amendments to Topic 350 in this proposed ASU would allow NFP entities to elect the accounting alternative to:

* Amortize goodwill on a straight-line basis over 10 years, or less if the NFP entity demonstrates that a shorter useful life is more appropriate

* Test for impairment upon a triggering event

* Have the option to elect to test for impairment at the entity level

Further, the accounting alternative available under the amended Topic 805 would allow NFP entities to recognize fewer items as separate intangible assets in an acquisition by including certain customer-related intangible assets and non-complete agreement in goodwill.

Scope & Effective Date

The amendments in this proposed ASU would apply to all entities that meet the definition of NFP entities as defined in the FASB Master Glossary, including conduit bond obligors.

The comment period on the proposed ASU was open until February 18, 2019. The effective date of the proposed ASU will be determined after the FASB considers stakeholder feedback received within the comment period.

The Exposure Draft related to the proposed ASU can be found at: