Goodwill impairment testing—tax considerations

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June 2017

Overview

On January 26, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-04, Intangibles – Goodwill and Other (Topic 350), which is intended to simplify goodwill impairment testing. This publication provides an overview of the goodwill impairment testing procedures as provided in the new standard as well as specific income tax factors that should be considered when performing such procedures.

The takeaway

Numerous tax law and tax accounting considerations can affect whether there is an impairment of goodwill as well as the amount of impairment. Tax management and tax advisors can, and should, play a significant role in assessing the tax considerations that may impact goodwill impairment testing. Given the changes to goodwill impairment testing provided in the new standard, the testing outcomes may become more sensitive to impacts from tax considerations.

Companies may also be including financial reporting disclosures relating to goodwill impairment testing. Disclosures might include a discussion of methodologies, market participant inputs, and other key assumptions considered in impairment testing. Tax considerations may be an appropriate aspect of such disclosures.

The importance of interdisciplinary coordination among the various expert resources involved with impairment testing cannot be overemphasized.

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Rick Levin

US Tax Accounting Services Leader, PwC US

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