In late 2014, the FASB issued ASU No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination.
A proposal from the Private Company Council (PCC), ASU 2014-18 provides a qualifying private company an election to record certain intangible assets as part of goodwill rather than as separately identified intangible assets, when applying the acquisition method in transactions such as business combinations.
- ASU 2014-18 permits qualifying private companies an election to account for customer-related intangible assets that cannot be sold or licensed independently and noncompetition agreements as part of goodwill in transactions accounted for under the acquisition method, such as a business combination.
- Private companies electing the option may reduce the costs of compliance when accounting for these transactions, but must carefully weigh whether adoption is best for their circumstances.
- A private company electing this guidance must also elect to amortize goodwill as provided by ASU No. 2014-02 Accounting for Goodwill.
- The election is available upon the first qualifying transaction that occurs after the beginning of the first annual period starting after December 15, 2015, but may be adopted early for any financial statements not yet made available for issuance.
Learn the details about ASU 2014-18 in this Substance of the Standard: Accounting Election for Acquired Intangible Assets.