On March 30, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events. Under ASU 2021-03, private companies and not-for-profit entities that elect this accounting alternative, can perform the goodwill impairment triggering event evaluation as required under FASB Accounting Standards Codification (ASC) 350-20, Intangibles—Goodwill and Other—Goodwill, as of the end of the reporting period instead of monitoring for goodwill impairment triggering events during the reporting period.
It became clear that monitoring for goodwill impairment triggering events throughout the reporting period was difficult, especially during the pandemic. ASU 2021-03 reduces the complexity of accounting for goodwill for entities that report only annual financial statements. Private companies and not-for-profit entities should consider electing this accounting alternative as a way to further simplify their financial reporting systems.