FASB Announces End of Goodwill Amortization
It is a landmark decision. The Financial Accounting Standards Board has announced than an acquiring company can no longer amortize the goodwill associated with the acquisition.
The ruling is tentative now, and is expected to become final by spring of 2001. It is also expected that the ruling will apply retroactively.
The decision is good news for many companies. Although amortization is strictly a paper transaction, until now companies that amortized goodwill reported expenses that depleted current earnings. Now companies will be able to present income statements that more clearly reflect the cost of doing business.