FASB tentatively decides that goodwill should be amortised
24 December 2020
At their December 2020 meeting, the FASB, who set US GAAP standards, tentatively decided the following:
- An entity should amortize goodwill on a straight-line basis; an evolving amortization model would not be permitted.
- An entity should amortize goodwill over a 10-year default period, unless an entity elects and justifies another amortization period based on the facts and circumstances of the acquisition.
- An entity that elects another amortization period would be subject to a cap.
- An entity would not be required to reassess the amortization period.
No amendments to US GAAP have been proposed at this time, however, these decisions will form the basis for future standard setting. The IASB is also considering the subsequent accounting for goodwill, as they issued a discussion paper earlier in 2020. BDO responded to the discussion paper earlier this week (the response is available here).
The FASB news article may be accessed here.