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Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323)

In 2014, the Board amended the FASB Accounting Standards Codification® to
allow private companies an alternative accounting treatment for subsequently
measuring goodwill. The Board determined that those amendments were needed because of concern expressed by private companies and their stakeholders about the cost and complexity of the goodwill impairment test. The FASB added a project to its agenda to determine whether similar amendments should be considered for other entities, including public business entities and not-for-profit entities. The Board subsequently separated the project into two phases. The objective of Phase 1 of the project, which resulted in this Update, is to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment
test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.

The Board will evaluate the effectiveness of the guidance in this Update and
monitor the International Accounting Standards Board’s (IASB’s) projects on
goodwill and impairment before considering whether additional changes to the subsequent accounting for goodwill, including consideration of permitting or requiring amortization of goodwill and/or additional changes to the impairment testing methodology, are warranted. As a result, the Board moved Phase 2, the project on subsequent accounting for goodwill for public business entities and notfor-profit entities, to the research agenda.

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