Comment Letter to FASB on Identifiable Intangible Assets and Subsequent Accounting for Goodwill

The American Bankers Association (ABA) welcomes the opportunity to comment on Invitation to Comment: Identifiable Intangible Assets and Subsequent Accounting for Goodwill (ITC).We appreciate the Board’s continuing efforts to improve the financial accounting standards. Providing users of financial statements with accurate and usable information is critical and promotes transparency that facilitates appropriate decision making by investors. We support these objectives.

ABA strongly supports the overall project to review alternatives to the subsequent accounting for goodwill, including reconsideration of the goodwill impairment model. Goodwill is excluded from a bank’s regulatory capital, so the current accounting and impairment process ends up being, for many banks, an arduous process that often provides little value to our investors and supervisors. Banks are also users of the financial statements in making credit decisions. Credit decisions related to a borrower’s assets are based primarily on the assets that generate cash flows or that can be readily liquidated. Goodwill and its subsequent accounting are generally ignored when making those decisions.

The intangible value of an enterprise is difficult to measure and becomes even more so over time and when operating within a combined organization. Limitations on the value of this information strongly suggest that alternatives to subsequent treatment of goodwill may be broadly accepted by both bankers and bank investors. Outreach we have performed with banking analysts indicates general agreement with this assessment. With that in mind, bankers generally favor an option in Generally Accepted Account Principles (GAAP) to write-off goodwill rapidly or immediately. Such treatment will greatly reduce the time and cost of subsequently accounting for an issue that provides little value to financial statement users.