However, the transaction-based approach to accounting for goodwill under Opinion 17 treated the acquired entity as if it remained a stand-alone entity rather than being integrated with the acquiring entity as a result, the portion of the premium related to expected synergies (goodwill) was not accounted for appropriately. Acquiring entities usually integrate acquired entities into their operations, and thus the acquirers' expectations of benefits from the resulting synergies usually are reflected in the premium that they pay to acquire those entities.This Statement changes the subsequent accounting for goodwill and other intangible assets in the following significant respects: There may be more volatility in reported income than under previous standards because impairment losses are likely to occur irregularly and in varying amounts.
Because goodwill and some intangible assets will no longer be amortized, the reported amounts of goodwill and intangible assets (as well as total assets) will not decrease at the same time and in the same manner as under previous standards. This Statement changes the unit of account for goodwill and takes a very different approach to how goodwill and other intangible assets are accounted for subsequent to their initial recognition. Financial statement users also indicated that they did not regard goodwill amortization expense as being useful information in analyzing investments.ĭifferences between This Statement and Opinion 17 As a result, better information about intangible assets was needed. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements.Īnalysts and other users of financial statements, as well as company managements, noted that intangible assets are an increasingly important economic resource for many entities and are an increasing proportion of the assets acquired in many transactions. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition.
This Statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. Goodwill and Other Intangible Assets (Issued 6/01)
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