Annual Goodwill Impairment Test Might Be Eliminated
FASB said it favored doing away with the annual goodwill impairment test for public companies, signaling it provides little benefit to investors. Board members said an impairment test should be done when there is an indicator that goodwill is likely impaired. Impairment testing can happen at any time, but not later than the end of a reporting period, according to the discussions. “I would call it an indicator approach— triggers may be a subset of that but I think broader facts and circumstances indicate that there is an impairment and to me that’s probably the more likely scenario that really [it is] the accumulation of things that do that,” FASB Vice Chair James Kroeker said. The board discussions were part of ongoing talks to craft a proposal that would revise the subsequent accounting of goodwill. The reporting of goodwill—a figure signifying the intangible value of an acquired asset—can impact profitability if that value falls. Goodwill becomes impaired if its fair value declines below its carrying value. “The immediate question I think internally is ‘did it happen earlier and did we miss it,’ the auditors come in and ask ‘did it happen earlier and did you miss it,’ audit regulators come in and ask ‘did it happen earlier and did you miss it,’ and securities regulators come in and ask ‘did it happen earlier and did you miss it,” Kroeker said. “So I think it’s belts and suspenders,” he said. “I think we’ve shown that the system already challenges that and so I don’t think the annual impairment test is really a necessary one for entities that have properly functioning financial reporting system and controls.”
Acting Chair Halts Previously Planned Advisory Group
PCAOB Acting Chairperson Duane DesParte is hitting the brakes on forming the new Standards Advisory Group (SAG) that was heavily criticized by investor advocates in the spring when its charter was unveiled. DesParte also said that he has directed staff to reassess the board’s stakeholder engagement efforts. “It is crucial we seek a comprehensive and diverse array of perspectives and advice to best inform our oversight work and advance our mission of investor protection,” DesParte said in a statement. “Listening carefully to the feedback we have received and reflecting on our work in many areas, including our engagement with the investor community, I believe it is important to reassess our current path to ensure all stakeholders are represented at the table and that their voices are heard.” The PCAOB said that the nominations process to become a SAG member is being paused. The board will consider the nominations that were submitted once it completes reevaluating the framework of advisory groups. Additional nominations may be sought thereafter. This comes as the PCAOB in late March set up the new SAG and abolished previous advisory panels, the Standing Advisory Group (old SAG) and the Investor Advisory Group (IAG). The new SAG would advise the board on its standards-setting activities. The new SAG would have 18 members: five investors, four auditors, three audit committee members or directors, three financial reporting oversight personnel, and three academics or others with specialized knowledge. In mid-April, the board opened up nominations with deadline of June 14.
Webinars on Business Combinations under Common Control Scheduled.
The IASB said it will hold a second batch of webinars about potential accounting changes to rules for transfers of businesses between companies within the same group. Two webinars will be held on Wednesday, June 30, for 45 minutes: 9:00–9:45 a.m. and 4:30–5:15 p.m. GMT (i.e., 4:00–4:45 a.m. and 11:30 a.m.–12:15 p.m. EDT). The events are aimed at generating broad feedback on a November 2020 IASB Discussion Paper (DP) 2020-2, “Business Combinations under Common Control,” which was issued with a September 1 public comment deadline. IASB member Bruce Mackenzie and technical staff will “discuss feedback received in the initial outreach activities, and address some of the frequently asked questions from stakeholders,” the announcement stated. The IASB first held a webinar on the topic on January 27, which focused on a general overview of the discussion paper.