Dive Brief:
- Financial Accounting Standards Board (FASB) Chairman Richard Jones said in an interview with the Wall Street Journal that the rule-making panel plans to consider changes to accounting for goodwill and the disclosure of expenses, two controversial issues among investors and companies.
- "Our agenda is filled with important items, but those are two that have drawn a lot of interest from people," according to Jones, who became FASB chairman in July.
- FASB plans to propose new accounting standards for goodwill and the disclosure of expenses this year, the Journal quoted Jones as saying, though the standards are unlikely to be finalized in 2021.
Dive Insight:
Jones's comments appear to signal a shift to a more activist stance by FASB which, as COVID-19 spread last year, eased its standard-setting pace and focused on advising companies on how to account for disruption to their business.
Many finance executives last year reconsidered how they approach impairment testing for goodwill as the pandemic intensified and extreme market volatility complicated efforts to assess fair value and future cash flows.
Goodwill arises when a company acquires another business for more than its book value. Under generally accepted accounting principles (GAAP), companies must annually recalculate the value of goodwill assets to determine whether any impairment has occurred.
FASB is considering changing the process for such recalculations, which many companies believe are subjective and too costly. Under one approach, a company world forgo annual tests and instead write down a predetermined portion for impairment of goodwill each year.
The board also plans to continue pursuing a project in so-called segment reporting that may require public companies to identify large expenses at some business units, the Journal said. FASB intends to discuss early this year how it would define segment expenses in a new rule, the Journal said.
While investors and analysts favor such disclosures, companies often oppose revealing such information, as it could benefit their competitors.
