Defining Issues   |   April 2017
 

Important clarification about the effective date for goodwill impairment simplification

In informal discussions with KPMG, the FASB staff have clarified certain aspects of the effective date of the simplified goodwill impairment test. Companies need to apply the same impairment model consistently to all goodwill impairment tests performed within a fiscal year, except for interim tests performed as of a date before January 1, 2017.

Applicability

ASU 2017-04

  • Company with goodwill on its balance sheet

Relevant dates

Effective date:



For annual and any interim goodwill impairment tests performed for annual periods beginning after

Public business entities (SEC filer)


Dec. 15, 2019

Public business entities (non-SEC filer)

Dec. 15, 2020

All other entities



Dec. 15, 2021

Key impacts

  • In informal discussions with KPMG, the FASB staff have clarified certain aspects of the effective date of the simplified goodwill impairment test
  • All companies may early adopt the standard for goodwill impairment tests with measurement dates on or after Jan. 1, 2017
  • Companies need to apply the same impairment model consistently to all goodwill impairment tests performed within a fiscal year, except for interim tests performed as of a date before Jan. 1, 2017

Examples

EXAMPLE 1

Facts

  • Fiscal year-end: Sep. 30, 2017
  • Annual impairment test date: July 1
  • Company performed a two-step interim impairment test as of Nov. 30, 2016 because of a triggering event

Analysis

Company may early adopt the simplified goodwill impairment test for the annual impairment test on July 1, 2017 even though it performed a two-step interim test during the same fiscal year. This is because the interim test was performed as of a date before Jan. 1, 2017.

EXAMPLE 2

Facts

  • Same facts as Example 1, except that the two-step interim impairment test was performed as of Feb. 1, 2017

Analysis

The company is prohibited from early adopting the simplified impairment test for its annual goodwill impairment test on July 1, 2017. This is because it needs to apply the same impairment model to all impairment tests within the same fiscal year, unless an interim test was performed before Jan. 1, 2017. In this example, the interim test was performed after Jan. 1, 2017.

EXAMPLE 3

Facts

  • Fiscal year-end: Dec. 31, 2016
  • Annual impairment test date: Oct. 31
  • Most recent annual impairment test indicated that a reporting unit failed Step 1 but passed Step 2

Analysis

  • For the quarter ended Mar. 31, 2017, the company needs to consider whether the previously failed Step 1 continues to be an impairment indicator
  • If the company wants to early adopt the simplified goodwill impairment test for the year ended Dec. 31, 2017, it needs to perform any interim goodwill impairment tests using the new guidance
  • If the new guidance is not used for the quarter ended Mar. 31, 2017, the company is prohibited from adopting the new guidance for the year ended Dec. 31, 2017

Related content

Read more fully about ASU 2017-04 in KPMG’s Defining Issues: FASB simplifies goodwill impairment test

 

 

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