FASB to take on goodwill accounting—again

Goodwill accounting is back on the menu at FASB, four years after the accounting standards body dropped a project to revise the model for writing down the intangible asset.

This time FASB is taking a much smaller bite. Instead of attempting a massive change like it did four years ago—and failing to get it across the finish line—FASB on July 29 decided to add a project to its technical agenda that would focus on “targeted improvements to goodwill impairment testing.” Those improvements focus on the frequency of the testing and at what organizational level an impairment analysis needs to be done.

Goodwill, according to fintech Mercury, is “how accounting captures the value of things that don’t fit neatly into a balance sheet, like reputation, customer stickiness, brand, and people.” It is often “created when the purchase price” of an acquisition is “higher than the fair market value…of the company’s net assets,” the Corporate Finance Institute says.

Valuation firm Kroll’s 2026 US Goodwill Impairment Study found that in 2025, among 8,393 US-based companies, there were 266 goodwill impairment events worth $97 billion. Goodwill impairment means a drop in value, so “it potentially signals that a business combination failed to meet management’s expectations due to internal or external factors,” according to CPA firm Miller Kaplan.

Needs work. Goodwill accounting reared its head again in February after some issuers and investors, in comments about FASB’s future standard-setting agenda, mentioned their dislike of having to test for impairment annually. At that time, the FASB directed its staff to “continue their research for a future possible agenda vote,” CFO Brew reported.

At the July 29 meeting, after research and outreach, FASB staff recommended some potential solutions to the board, wrapped together in one project: potentially getting rid of the annual testing requirement (introduced in 2001) and requiring goodwill impairment testing only upon a triggering event—like the loss of a key customer or contract, and having impairment testing done at the operating segment level—typically, one level above a reporting unit.

“Testing goodwill at the operating segment level would simplify the model, improving consistency and operability, reduce preparer and audit burden, and better align the impairment test with existing financial reporting structures and how management evaluates performance, while continuing to provide users with decision useful information,” a FASB staffer said at the meeting.

While a majority of the board voted to add the combined project to its technical agenda, board members did have some reservations.

For example, Joyce T. Joseph said she could “only support adding a project addressing the level of goodwill testing if we conduct more outreach and get feedback from investors.”

And Joseph said she couldn’t support a project to address the frequency of goodwill impairment testing and requiring impairment analysis only upon a triggering event, “because there would be significant reliance on the triggering event determination, and I think this would result in greater management judgment and discretion.”

Stay tuned.