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FASB Updates Goodwill Impairment Rules

There's a new proposal regarding goodwill impairment rules for accounting.

The Financial Accounting Standards Board, the private sector organization that sets accounting and reporting standards, recently finalized changes to an update regarding the goodwill impairment test.

The test requires reporting companies to compare the fair value of their revenue-earning components - known as reporting units - with the carry amount (including goodwill) to determine the goodwill for impairment, according to the FASB website. The board said it had drafted the amendments in order to ease private companies' concerns that the test was too costly and complex.

"The amendments allow both public and nonpublic entities an option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test," FASB stated. If the entities use that option, they wouldn't have to calculate a reporting unit's fair value unless it seems likely that the fair value would be less than the carrying amount.

Earlier this month, FASB also proposed its 2012 U.S. GAAP Financial Reporting Taxonomy, which is currently available for public review on the board's XBRL page, until October 31, 2011. The proposed taxonomy would allow companies to accurately tag the "thousands of pieces of financial data included in typical long-form financial statements and related footnote disclosures" and make them more easily searchable.