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Cheng also shared the similar experience of that were client-facing and negatively affected by
Aaron’s Company Inc. in Atlanta, which sells and the pandemic but then made changes to rebound
leases furniture, home electronics, and appliances and become stronger. These included restaurants
in stores and online. “They determined the need for that were hurt by fewer dine-in customers but
a goodwill impairment test was triggered because moved to delivery or outdoor dining to grow
they experienced a significant decline in stock price revenues. “Not as obvious were manufacturers and
and market capitalization in March 2020, conclud- suppliers to companies that were initially hurt
ed goodwill was fully impaired, and recorded a $447 but then did very well, like Zoom or Amazon,
million impairment charge in the first quarter of software service arrangements, and web-based
2020,” he said. “But second quarter results exceeded businesses,” he said.
expectations, and the third quarter had record levels Dyer added: “Grocery stores, residential real
of revenues and earnings.” estate, and medical service and equipment providers
In Cheng’s experience, industries that could all experienced difficulties at the beginning of the
benefit from the accounting alternative were those pandemic but then rebounded and even had a

ASU 2021-03 provisions

■ FASB Accounting Standards Update (ASU) No. 2021-03 is ■ As this is a private company alternative, any companies
effective on a prospective basis for fiscal years beginning contemplating an initial public offering or being acquired
after Dec. 15, 2019. in a special-purpose acquisition company transaction
■ Entities also have an unconditional one-time option to would have to retrospectively unwind the accounting,
adopt this accounting alternative prospectively after which would mean going back to periods when triggering
the ASU 2021-03 effective date without assessing the event assessments were made only at period end and
preferability of making the change under FASB ASC Topic evaluating (without hindsight) whether there were
250, Accounting Changes and Error Corrections. triggering events during the reporting periods, including
interim reporting periods, that would have resulted
■ If ASU 2021-03 provisions are adopted after its original in a goodwill impairment and, if so, measuring that
effective date, they should be applied prospectively as impairment.
of the beginning of the first reporting period when the
accounting alternative is elected. ■ Goodwill impairment guidance for public business entities
is not changed. However, FASB has a separate project
■ Early adoption is permitted for both interim and annual underway focused on wider improvements to subsequent
financial statements that have not yet been issued or accounting for goodwill and intangible assets for all entities,
made available for issuance as of March 30, 2021. An including public companies. The board has tentatively
entity should not retroactively adopt ASU 2021-03 for determined to require all entities to amortize goodwill on
interim financial statements already issued in the year of a straight-line basis, generally over a 10-year period. This
adoption.
project may also result in potential changes to the existing
■ FASB maintained the requirement that goodwill goodwill impairment model. Please refer to the FASB
impairment is not reversible. website for the latest developments on this project.

■ The accounting alternative for a goodwill impairment ■ This accounting alternative is applicable only to goodwill
triggering event evaluation can be elected even if and does not change the existing requirements for
the entity has elected the accounting alternative for impairment assessments of other assets (for example,
amortizing goodwill. indefinite-lived intangibles and long-lived assets).

■ The only additional disclosure requirement is disclosure of However, as discussed in the preceding bullet, FASB has
the election of the alternative as a significant accounting a separate project underway that may affect subsequent
policy. accounting for intangible assets.

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