On December 20, 2018 the FASB issued a draft proposal that extends the private company accounting alternative for goodwill (ASU 2014-02) and business combinations (ASU 2014-18) to nonprofit entities and is intended to simplify the subsequent accounting for goodwill and for certain identifiable intangible assets in a business combination.
Under current guidance, goodwill for nonprofit entities is not amortizable and is required to be tested for impairment at the reporting unit level, at least annually. Additionally, nonprofit entities are required to separately recognize any intangible that either arises from a contractual or legal right, or is capable of being sold separately from the entity, transferred, licensed, rented or exchanged.
If enacted, this new guidance would allow nonprofit entities to amortize goodwill over ten years (unless it can be demonstrated that a shorter useful life is more appropriate), and would only require a test of impairment to be completed (at either the reporting or entity level) when a triggering event occurs. It would also allow entities to include customer-related intangible assets, that are not capable of being licensed or sold individually, in goodwill rather than recognizing these amounts separately.
The draft will undergo a period of public review for further considerations before final publication. Comments on the working draft are due February 18, 2019. For more information, contact us in one of our many locations.