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FINANCIAL REPORTING

‘There’s a good chance not consider whether triggering events occurred
during the year until their auditors ask them at year
many companies end to consider whether anything happened during
the year and do a retrospective review.”
“For private companies issuing quarterly GAAP
experienced a triggering financial statements, this alternative is not going
to help them too much, but those issuing only
annual financial statements may be able to defer
event during 2020 because the impairment test until the year-end date,” said
Mike Cheng, CPA, partner at Frazier & Deeter
in Atlanta.
of the pandemic.’ COVID-19 AND GOODWILL IMPAIRMENT

“There’s a good chance many companies experienced
Mike Cheng, CPA, partner at Frazier & Deeter in Atlanta a triggering event during 2020 because of the
pandemic,” Cheng said.
“ASU 2021-03 allows eligible companies to By choosing the accounting alternative for
elect to evaluate whether a triggering event has evaluating triggering events, entities that suffered
occurred at a reporting date as opposed to evaluat- short-term negative impacts from the pandemic
ing whether one occurred during any point in in interim periods that subsequently reversed
a reporting period,” said Graham Dyer, CPA, a would potentially not have to record good-
partner in the accounting principles group at Grant will impairment.
Thornton LLP in Chicago. “That is a big simplifica- Cheng shared this example from Del Taco
tion because a complication when applying existing Restaurants, a public company that could not
goodwill impairment guidance for a lot of private take advantage of the ASU 2021-03 alternative
companies and not-for-profit entities is they may but whose experience was shared by many private
companies. “Due to COVID-19, for their first
quarter ended March 24, 2020, same-store sales
AICPA RESOURCES were down 27%, their stock price was down about
68%, and they recorded an $87 million goodwill
Articles impairment charge,” he said. “In the second quar-
“FASB Provides Goodwill Triggering Relief for Private Companies, Not-for- ter, same-store sales were flat year over year and
Profits,” JofA, March 30, 2021 franchise sales were up, and by September, their
“Assessing Goodwill Impairment Amid COVID-19,” JofA, March 2, 2021 stock price was up 13% from December 31, 2019.
If this were a private company, financial statement
“FASB Approves Private Company and NFP Goodwill Triggering Event users and investors could be confused by a large
Alternative,” JofA, Feb. 10, 2021
goodwill impairment despite the fact the company
is performing well by the end of the year.”

IN BRIEF triggering events and perform any can be elected in addition to the
resulting test for goodwill impairment accounting alternative for amortizing
■ In March 2021, FASB issued ASU No. between reporting dates, the goodwill.
2021-03, which provides an accounting accounting alternative allows entities ■ Born out of the pandemic, this
alternative that allows private to evaluate goodwill impairment standard can be useful any time
companies and not-for-profit entities triggering events only at the end of there is economic disruption,
to evaluate triggering events as of the each reporting period. especially if it happens earlier in a
end of the reporting period. ■ The goodwill accounting alternative reporting period and there is time for
■ Instead of having to monitor for for evaluating triggering events recovery.

To comment on this article or to suggest an idea for another article, contact Courtney Vien at Courtney.Vien@aicpa-cima.com.

26 | Journal of Accountancy June 2022