What Every CFO Needs to Know About Goodwill Impairment

Chief financial officers face new, potentially significant burdens in the accounting for past and future acquisitions, as a result of recent Financial Accounting Standards Board (FASB) regulations, 141, Business Combinations, and 142, Goodwill and other Intangible Assets. CFOs are having to bring in independent business valuation firms to perform some or all of the FASB 142 testing.

Contact:   
Roger Winsby
bizownerHQ.com
978-654-6092
roger_winsby@bizownerHQ.com

What Every CFO Needs to Know About Goodwill Impairment

Chief financial officers face new, potentially significant burdens in the accounting for past and future acquisitions, as a result of recent Financial Accounting Standards Board (FASB) regulations, 141, Business Combinations, and 142, Goodwill and other Intangible Assets. According to Dr. Stanley Jay Feldman, Associate Professor of Finance at Bentley College and Chairman of bizownerHQ, CFOs and their auditors are now just learning that, although the mandates of FASB 141 and 142 are clear, the methods for achieving those mandates are far from clear. CFOs are having to bring in independent business valuation firms to perform some or all of the FASB 142 testing. For companies that make many acquisitions, having a third-party valuation of each unit conducted annually can be a significant cost."

Dr. Feldman has written a paper discussing the valuation challenges raised by FASB 142. This paper is available for free downloading in the Whats New section at www.bizownerHQ.com. Dr. Feldman states that while FASBs goal of bringing company balance sheets more in line with market values is laudable, they have not specified the necessary details to guide accountants and valuation consultants on key issues."

Dr. Feldman addresses three valuation issues raised by FASB 142:
1.   What are the appropriate valuation methodologies to determine the fair market value of an acquired unit?
2.   When using the discounted cash flow valuation method, what should be the cost of capital applied to the acquired unit?
3.   Should the usual valuation adjustments for a control premium and a liquidity discount be applied in the valuation for an acquired unit?

Dr. Feldman provides his answers to these questions based on a careful reading of the FASB 142 notes.

In regards to the significant costs facing CFOs from having an independent business valuation firm involved each year, Dr. Feldman argues that the business valuation industry has to innovate and become more cost-effective. With the right technology, these FASB 142 valuations can be much less costly, yet highly accurate."

About bizownerHQ
bizownerHQ provides independent, reliable information on what a business is worth. Its standard services meet almost all business valuation needs, including FASB 142 goodwill testing. bizownerHQ has streamlined traditional valuation processes using expert system technology, detailed industry databases, and Internet efficiencies. The companys valuation services are unmatched in accuracy, timeliness, and affordability.