Fasby

Generally speaking, it appears that the decision to enact FASB Statement 142 in 2001 was well founded. This represented the first major change to the accounting treatment of goodwill in over 30 years, which some would argue was long overdue. Further, it placed greater accountability for the goodwill created by merger & acquisition (M&A) activity into the hands of corporate management. Specifically, frequent (and visible) goodwill write-offs may represent inadequate strategy or decision making capability of a company's leadership.

Users of financial statements probably derived many benefits from the enactment. First, I'm sure the financial community (eventually) applauded the adoption of a consistent set of governing rules surrounding goodwill and its subsequent amortization. Financial statements of companies that acquire goodwill would better reflect the true economics of these assets and make it easier to gauge their ability to generate cash. Conversely, subsequent and distinct impairment charges became visible and open to scrutiny.

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