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FINANCIAL REPORTING
Goodwill triggering

event alternative

provides relief to

some companies

Learn how FASB’s goodwill accounting alternative for evaluating
triggering events can make financial reporting easier for private

companies and not-for-profit entities beyond the pandemic.

By Maria L. Murphy, CPA

A entities with an accounting alternative to evaluate About the
ssessing goodwill for impairment became
goodwill triggering events as of the end of the
more challenging during the COVID-19
pandemic because of significant changes in
Provisions.”) A triggering event is an event or
business operations and overall economic uncer- reporting period. (See the sidebar, “ASU 2021-03 author
Maria L. Murphy,
tainty. Considering goodwill impairment triggering change in circumstances that indicates the fair value
CPA, is a freelance
events between reporting dates in this environment of the entity (or the reporting unit) may be below
writer based in
was very difficult for companies already struggling its carrying amount. The intent of this accounting
North Carolina.
with employees working remotely and keeping alternative is to reduce the cost and complexity of
daily business activities going. Because impairment the evaluation and provide users of financial state-
indicators that arise during a reporting period ments with more relevant information.
could change by the end of that reporting period,
performing a goodwill impairment evaluation and WHAT DOES ASU 2021-03 CHANGE?
potentially recording an impairment charge on the Under the accounting alternative in ASU
date that a triggering event occurs may not always 2021-03, private companies and not-for-profit
provide the most useful information for users of entities can elect to evaluate goodwill impair-
financial information. ment triggering events as required in FASB ASC
In March 2021, FASB issued Accounting Subtopic 350-20 only at the end of each report-
Standards Update (ASU) No. 2021-03, Intangibles ing period (whether interim or annual) instead of
— Goodwill and Other (Topic 350): Accounting monitoring for triggering events and potentially
Alternative for Evaluating Triggering Events, which measuring any related impairment between
provides private companies and not-for-profit reporting dates.

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