Letter to FASB on the Proposed Accounting Standards Update

Mr. Richard R. Jones
Chairman
Financial Accounting Standards Board
401 Merritt 7
P.O. Box 5116
Norwalk, CT 06856-5116

Dear Chairman Jones:

The American Bankers Association (ABA) welcomes the opportunity to comment on Proposed Accounting Standards Update— Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events (the Exposure Draft). The Exposure Draft seeks to allow certain private companies the option to evaluate relevant facts and circumstances only as of year-end in order to determine whether goodwill is impaired. This is in lieu of the current requirement to monitor and evaluate in the interim periods any goodwill impairment triggering events.

ABA supports the objective of the Exposure Draft, which is to provide operational relief for financial statement preparers. However, ABA does not support its proposed scope, as it excludes regulated banks, which are subject to regulatory reporting on a quarterly basis.

The vast majority of banks in the United States are private companies. Regardless of size and ownership, all regulated banks in the United States are subject to quarterly regulatory reporting of financial and other information via the Call Report. This information includes the reporting of goodwill and therefore, we believe would disqualify banks from exercising the time-saving option detailed in this proposal.

A primary purpose of the Call Report is to help banking supervisors monitor the safety and soundness of the banks they supervise. With this in mind, goodwill is excluded from a bank’s regulatory capital and it is also generally disregarded by their investors. Delaying an evaluation of impairment of goodwill until year-end would, therefore, not be misleading to the users of these interim financial statements. Filing a quarterly call report should not disqualify a bank from exercising the proposed option.

According to September 2020 Call Report data, over one thousand banks with less than $1 billion in assets reported goodwill on their balance sheet. ABA believes private banks should not be disqualified and should be considered and made able to avail themselves of any and all goodwill relief the FASB provides to private companies. We, therefore, recommend that paragraph 350-20-15-4A be revised to state the following:

A private company or not-for-profit entity may make an accounting policy election to apply the accounting alternative for a goodwill impairment triggering event evaluation to goodwill subsequently accounted for in accordance with Subtopic 350-20 if it only reports goodwill (or reports accounts that would be affected by a goodwill impairment such as retained earnings and net income) on an annual basis or if relevant financial supervisors exclude goodwill from regulatory capital (or similar) calculations. This accounting alternative may be applied only by entities and to the transactions and activities within the scope of the alternative.

Thank you for considering our comments. If you need additional information or have questions, please contact me ([email protected]; 202-663-5318).

Sincerely,

Joshua Stein