ASU 2021-03 – Private Company and Not-For-Profit Updates to Evaluating Goodwill Impairment Triggering Events

The Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) 2021-03, Accounting Alternative for Evaluating Trigger Events.

This updated guidance eliminates the need for private companies and not-for-profit entities to continually assess goodwill for impairment throughout the reporting period, and rather perform only one analysis at the end of a reporting period.  The reporting period can be either an interim or an annual reporting period. 

Current guidance under Subtopic 350-20, Intangibles--Goodwill and Other--Goodwill, stipulates that an entity is required to monitor and evaluate whether goodwill is impaired due to a triggering event on an ongoing basis whenever a triggering event occurs. Naturally, given the COVID-19 pandemic, entities were finding that the uncertainty surrounding the whole situation was basically a non-stop triggering event. The ensuing analysis for triggering events was found to be continuous, costly and complex. This concern was communicated to the FASB, and as a result, the FASB issued ASU 2021-03. The accounting alternative should alleviate a lot of the cost and burden of evaluating triggering events, by aligning this exercise with closing procedures.  The alternative provides the added benefit of hindsight when assessing for goodwill impairment, which is a tremendous advantage in a rapidly changing environment similar to that during the COVID-19 pandemic. Private companies or not-for-profit organizations that elect this alternative should include impairment assessments as part of period-end closing procedures, in order to capture any triggering events that could have occurred.  

The amendments in this Update apply only to private companies and not-for-profit entities, and are effective on a prospective basis for fiscal years beginning after December 15, 2019. Additionally, the amendments in this update do not require additional disclosure beyond the existing requirements.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Supreme Court Ruled State Request for Donor Information Unconstitutional
Applying for Federal Income Tax Exemption?
IRS Experiencing Delays: Exempt Organizations are Encouraged to e-file Forms 8868 and 990-ez
LIFO Liquidation Relief for Automotive Dealers
Will We See Charitable Gift Breaks Post 2021?
Pandemic Costing American Women Now and for 20 Years
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us
Map of Pittsburgh Office

One PPG Place, Suite 1700
Pittsburgh, PA 15222

[email protected]
p:412.261.3644     f:412.261.4876

Map of Columbus Office

65 East State Street, Suite 2000
Columbus, OH 43215

[email protected]
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102

[email protected]

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.