New Accounting for Goodwill: Application of American Criteria from a German Perspective

Fachartikel 220



The problem

In February 2001, the Financial Accounting Standards Board (FASB) published its revised exposure draft on accounting for business combinations and intangible assets. This proposal was followed, on June 29, 2001, by Statement of Financial Accounting Standards (SFAS) 141 “Business Combinations” and SFAS 142 “Goodwill and other intangible assets.” With these new standards, the FASB eliminated the pooling-ofinterests method of acquisition accounting and substituted the so-called impairment-only approach to goodwill accounting for the previously mandatory amortization of this intangible asset. The new standards gave rise to an intense debate in Germany on the compatibility of the impairment-only approach to goodwill arising in acquisitions with traditional rules and legal regulations of accounting and on its usefulness for investor decision-making. About half a year later, the German Accounting Standards Board (GASB), the German standard-setting body, issued its exposure draft No. 1a on the compatibility of SFAS 141 and 142 with accounting directives, issued by the European Economic Community (EEC). The board declared that in spite of the fact that EEC directives require amortization of goodwill within four years following the acquisition or over its useful life, group accounts prepared according to internationally accepted accounting standards, including SFAS 141 and 142, are consistent with the EEC directives.....

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