Accounting/Finance?

Question

Describe implications for goodwill in light of current accounting procedures?

Answer 1

Goodwill has been under scrutiny as of lately. US GAAP was changed with FASB 142 back in 2001 to essentially make goodwill amortization up to the Board at company level, instead of mandating amortization. Other countries have followed US GAAP, most importantly being the IFRS GAAP adoption of this policy back in 2005.

Now goodwill is assessed every year instead of having a steady amortization, subject to the review of management.

The bottom line is higher "profits" due to the lack of amortization, but the higher instance of bulky write-offs once purchase-accounted acquisitions become impaired (e.g. AOL).