Testing Goodwill for Impairment: An Optional Consideration of Qualitative Factors

Brian W. Carpenter, PhD, and Douglas M. Boyle, CPA, CMA

On April 22, 2011, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU), “Testing Goodwill for Impairment,” aimed at lessening the complexity and costs of determining whether goodwill has been impaired. More specifically, the ASU would provide preparers with an option to use qualitative factors to assess whether a reporting unit's fair value is less than its carrying value in order to determine whether it is necessary to perform the twostep impairment test currently required by FASB. This proposal was approved in September 2011 and is effective for fiscal years beginning after December 15, 2011. Early adoption is permitted.