Accounting Alternative for Amortization of Goodwill in Private Companies (Coursework Sample)

Accounting Alternative for Amortization of Goodwill in Private Companies Author Affiliation Course Instructor Due date Accounting Alternative for Amortization of Goodwill in Private Companies The Accounting Standards Codification (ASC) 350 under the Accounting Standards Update (ASU) No. 2014-02 covering intangibles such as goodwill best provides the goodwill amortization accounting mechanism that private companies may use in their reporting. It allows private entities to amortize their goodwill using straight-line method for a useful life of up to 10 years (PwC, 2014). It also permits private companies to amortize the goodwill acquired from business combinations and apply the simplest impairment model. The goal of the provision was to help minimize complexities that arise when reporting goodwill impairment by private companies (PwC, 2014). Moreover, the goodwill alternative under ASC 350, ASU No. 2014-02 is relevant to all the existing goodwill in the company (FASB, 2014). It also applies to goodwill arising from future business combinations. ASC 350-20-35-73 requires private companies to measure any goodwill impairment loss as the excess amount arising from the difference between fair value and carrying amount of an entity. The impairment loss captured under the code should not be more than the carrying amount (FASB, 2014). The section best provides the accounting alternative for the amortization of goodwill because it not only provides the amortization method that a reporting entity, but also the reported value and amortization period. Moreover, the reduced cost of compliance, reduced complexity, favorable tax effects, and lower possibility of impairment due to amortization of goodwill are some of the factors that make the codification the best accounting alternative for election by private en...