Trigger based goodwill testing and COVID-19
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Trigger based goodwill testing and COVID-19

Oct 21, 2020 · 386.5 KB Download

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Goodwill impairment assessments remain an area of limited focus for many private companies. Further, awareness of required trigger-based impairment testing is low. The confluence of these circumstances, as well as broad recoveries in many industries since the onset of the pandemic may mean that some will intentionally or unintentionally disregard the potential trigger-based impairment of goodwill.

The CPEA feels that this may lead to materially misstated financial statements, potentially indefinitely since goodwill is not amortized under the traditional models. These type of lurking material misstatements are often eventually surfaced by users such as regulators, peer reviewers, new CFOs, or new auditors many years later but not without reputational damage to those that were party to the originally misstated financial statements. Given the breath and magnitude of the pandemic, entities with material goodwill balances will need to carefully and appropriately consider trigger-based impairment of goodwill due to COVID-19 economic decline. Our report discusses the nuances and considerations for an assessment that may need to endure many years and unforeseen users.

Download the Report on Goodwill impairment and COVID-19

File name: CPEA-goodwill-impairment-coronavirus.pdf

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