IMA Financial Reporting Committee comment letter on the FASB’s Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill

Monday, October 7, 2019

The IMA Financial Reporting Committee (FRC or Committee) issued a comment letter in response to the FASB’s Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill. In this exposure draft, the FASB seeks observations on the current accounting guidance regarding the accounting for goodwill and other identifiable, intangible assets by public business entities. Among the issues raised, the FASB seeks constituent views on reinstating an amortization approach for public business entities or retaining the current impairment only approach.

The FRC’s letter communicates several points of consensus. It supports the FASB’s attention to the issue, and it supports standard-setting projects that aim to simplify impairment assessments. For public business entities, the Committee views comparability with IFRS of greater importance than comparability between public and private entities that follow US GAAP. The Committee agrees that if the Board mandates amortization, it should apply to all public business entities; optional accounting is unfavorable.

The Committee’s comment letter also addresses differences of opinion among its members regarding other aspects of the accounting for goodwill, particularly the reintroduction of amortization. The comment letter summarizes various viewpoints, including the characterization of goodwill as a wasting asset, market reactions to goodwill impairment charges, and management accountability for cost allocation decisions.