Goodwill accounting might not be the problem after all

The issue of goodwill accounting just won’t go away, however unenthusiastically Financial Accounting Standards Board (FASB) board members greeted revisiting the matter earlier this month.

Nearly four years after FASB scotched a revision project from its technical agenda—a “surprising move” at the time—the GAAP treatment for the non-current intangible asset was a discussion topic.

Goodwill—what valuation firm Kroll describes as “representing future economic benefits from acquired assets” that reflect “intangible factors like reputation, loyalty and brand”—takes up a lot of space on US public company balance sheets. One estimate from Valuation Research Corporation pegs the latest amount at $5.6 trillion.

Why revisit? In response to questions about FASB’s future standard-setting agenda, some issuers and investors continued to express their dislike of the current goodwill accounting approach adopted in 2001—requiring goodwill to be tested annually for a writedown of its value (impairment).

Impairments can signal that a merger has failed to produce the expected results, according to accounting firm Miller Kaplan, and companies say the yearly testing of impairment can be costly. In 2024, 8,134 companies wrote down $96 billion of goodwill, according to Kroll’s 2025 US Goodwill Impairment Study. Some investors say the impairment method doesn’t provide enough “decision-useful” information about post-merger performance.

“You know, if I were the queen of accounting,” said FASB member Marsha Hunt at the meeting, “and we had a clean sheet of paper, I don’t know if what we have today is where I would be, but now we have to be in the mode of, you know, is it an improvement?”

Even Chair Richard Jones said that he finds the current accounting for goodwill not “very relevant.”

Amortization fail. FASB staff came up with five “potential paths forward” for the board to consider, one of them a variation on the change that FASB abandoned in 2022—an amortization model. An amortization model—which was the standard until 2001 and assumes the goodwill acquired in takeovers is a “wasting asset” and thus written off by a set schedule like a piece of equipment—was difficult to get across the finish line.

“We worked very hard to come up with a meaningful amortization schedule, and just couldn’t get there,” said FASB member Frederick Cannon at the meeting.

In addition, FASB member Christine Ann Botosan said that “investors didn’t support the outcome because amortizing over an arbitrary period selected by the FASB unrelated to the economics of transactions, is not useful to them, and it destroys what little information they currently get from observing an impairment charge.”

She added, “We just abandoned a project that was focused on reducing the cost of the subsequent accounting for goodwill, and I lived through that entire painful experience as a board member. And we haven't received any new information. We don't have any new tricks up our sleeve.”

Wider shot. To provide the information some investors requested in their comments about goodwill accounting, like the nature of acquired goodwill (brand? reputation? IP?), for example, or the nature of the impairment, board members suggested a project tackling goodwill accounting might require a larger scope.

Business combination accounting, ASC 805—the GAAP standard for many M&A transactions—is where FASB could focus its energies instead.

“The disclosure enhancements that the investors mention…would be better addressed in the context of a broad look at the transparency in the business combinations disclosures,” said FASB member Joyce Joseph.

As for a standalone project on goodwill accounting, FASB did not vote formally on whether to include one. Staff were directed to continue their research for a future possible agenda vote.