My latest post was about general problems with asset “impairment” accounting — its absurdity, high cost and dubious information value. And I haven’t even begun to hone in on the wurst part: goodwill impairment.
It is somewhat more challenging to think about recognition and measurement of goodwill impairment when initial recognition of goodwill is itself an absurdity. To be as generous as possible, “goodwill” refers to a collection of assets that defy description; and at wurst, and by far most often, it is a homemade sausage of errors and omissions. “Goodwill” doesn’t begin to describe hardly any of it; and I will go so far as to claim that the term term itself is at the bottom of the accounting nomenclature barrel.
Now, back to impairment. From 2001 (See SFAS 142) until very recently (and more on this later) the core of the goodwill impairment exercise boiled down to an elaborate fill-in-the-blanks protocol:Step 0 [Read More...]