Private Companies Have Options for Eased Goodwill Accounting and Purchase Price Allocation

By Kyle Orwick, CPA

The Private Company Council's (PCC) first endorsed alternative within U.S. GAAP allows a more cost effective way to subsequently measure goodwill. This includes reduced burden of annual impairment testing; the option to test impairment when a triggering event occurs at the entity level; and reduced amount of testing in Step Two of the quantitative test.

Additionally, and more recently, private companies are now also allowed to elect an alternative where certain intangible assets are no longer required to be recognized separate from goodwill. We expect these accounting alternatives will be well received by the private business community. In this article we describe:

• Private Company Council Background and Authority
• Thought Process for Private Companies Accounting Alternatives
• Accounting Alternatives vs. Current Standards
• Tax Effects

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