New ASU for Goodwill for Not-For-Profit Entities Issued by FASB

The Financial Accounting Standards Board has released ASU 2019-06 that looks to extend relief similar to that offered to private companies for goodwill and other intangible assets to not-for-profit entities.

The FASB summary of the new ASU provides the following information on the new guidance:

The amendments in this Update extend the private company alternatives from Topic 350 (Update 2014-02) and Topic 805 (Update 2014-18) to not-for-profit entities.

Under the amendments to the accounting alternative in Topic 350, a not-for-profit entity should amortize goodwill on a straight-line basis over 10 years, or less than 10 years if the not-for-profit entity demonstrates that a shorter useful life is more appropriate. A not-for-profit entity that elects this accounting alternative is required to make an accounting policy election to test goodwill for impairment at either the entity level or the reporting unit level. A not-for-profit entity is required to test goodwill for impairment when a triggering event occurs that indicates that the fair value of the entity (or a reporting unit) may be below its carrying amount. Under the amendments to the accounting alternative in Topic 805, for transactions occurring after adoption of the alternative, a not-for-profit entity should subsume into goodwill and amortize customer-related intangible assets that are not capable of being sold or licensed independently from the other assets of a business and all noncompetition agreements acquired.

A not-for-profit entity that elects the accounting alternative in Topic 805 is required to adopt the alternative in Topic 350 to amortize goodwill. However, a not-for-profit entity that elects the accounting alternative in Topic 350 is not required to adopt the accounting alternative in Topic 805.