FASB recently issued Accounting Standards Update No. 2011-08, Testing Goodwill for Impairment, which amends the guidance in ASC 350-20. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step 1 of the goodwill impairment test). If entities determine that the fair value of the reporting unit is more likely than not less than the carrying amount (based of qualitative factors), the two-step impairment test would be required.
The amendment is providing a number of our client’s relief from having to complete a quantitative test.