Accounting Research Bulletins archives

Exhibit 5 presents an analysis of the effect goodwill amortization would have on S&P 500 companies with the largest goodwill balances by dollar magnitude. Across these 20 companies, there is a decline in average ROA of 2.7%, from https://personal-accounting.org/xero-review-features-pricing/ an average of 2.6% (as reported) to an average of −0.1% (pro forma). Similarly, there is a decline in average EPS of $3.47 per share, from an average of $2.45 per share (as reported) to an average of −$1.02 per share (pro forma).

• Overall, a change in the accounting guidance that reintroduces amortization as a part of the subsequent measurement of goodwill would result in the median S&P 500 company reporting an ROA that is 42% lower and an EPS that is 31% lower on an annual basis.
• The fourth and final level of the GAAP hierarchy consists of Implementation Guides published by the FASB, the official Accounting Interpretations issued by the AICPA, and the Industry Audit and Accounting Guides and Statements of Position, also from the AICPA.
• In the services and manufacturing industry groupings, goodwill accounts for the largest proportion of total assets (medians of 33.9% and 23.7%, respectively).
• The Accounting Research Bulletins were documents published by the Committee on Accounting Procedure between 1938 to 1959 on various problems that arose in the accounting industry.
• Exhibit 1 presents an industry-level summary of goodwill as a percentage of a company’s total assets for members of the S&P 500 reporting a nonzero goodwill balance for 2018.
• The ITC also seeks input on the length of any default period FASB might require and notes that some stakeholders support amortization of goodwill over a default period of 10 years.

The bulletins were issued during the 1939 to 1959 time period, and were an early effort to rationalize the general practice of accounting as it existed at that time. Some of these issuances dealt with topics that were highly specific to the era, such as Accounting for Special Reserves Arising Out of the War (ARB 13) and Renegotiation of War Contracts (ARB 15). FASB Accounting Standards Codification governs the preparation of corporate financial reports and is recognized as authoritative by the Securities and Exchange Commission (SEC), which regulates American stock exchanges. The Accounting Research Bulletins were documents published by the Committee on Accounting Procedure between 1938 to 1959 on various problems that arose in the accounting industry.

Accounting Research Bulletins

The introduction read that accounting “must be judged from the standpoint of society as a whole—not from that of any one group of interested parties.” Accounting Research Bulletins were documents issued by the US Committee on Accounting Procedure between 1938 and 1959 on various accounting problems. They were discontinued with the dissolution of the Committee in 1959 under a recommendation from the Special Committee on Research Program.[1] In all, 17 bulletins were issued; however, the lack of binding authority over AICPA’s membership reduced the influence of, and compliance with, the content of the bulletins. One example of an Accounting Research Bulletin (ARB) is ARB No. 43, “Restatement and Revision of Accounting Research Bulletins,” which was issued in June 1953. ARB No. 43 is particularly noteworthy because it served as a comprehensive restatement and revision of the previously issued ARBs, consolidating and updating the guidance contained in those bulletins. As this article went to press, FASB had received 89 comment letters on the ITC, with 48 letters supporting goodwill amortization, 37 opposed, and four with mixed views.

• For the ROA comparison, the change for the total sample is an average decrease of 2.6%, from an average 6.2% (as reported) to an average 2.6% (pro forma).
• The best known of the accounting research bulletins was ARB No. 43, which aggregated the information found in the earlier bulletins.
• The Accounting Research Bulletins were superseded by the Accounting Standards Codification (ASC) which became effective after September 2009.
• A review of the current goodwill carried on the balance sheets of S&P 500 companies finds, as expected, that there would be a noticeable decline in companies’ earnings and earnings-based financial ratios if FASB were to revive goodwill amortization.

For the ROA comparison, the change for the total sample is an average decrease of 2.6%, from an average 6.2% (as reported) to an average 2.6% (pro forma). Likewise, for the EPS comparison, the change for the total sample is an average decrease of $1.20 per share, from an average $3.84 per share (as reported) to $2.64 per share (pro forma). Overall, a change in the accounting guidance that reintroduces amortization as a part of the subsequent measurement of goodwill would result in the median S&P 500 company reporting an ROA that is 42% lower and an EPS that is 31% lower on an annual basis. Exhibits 5 and 6 further illustrate the impact that a reintroduction of goodwill amortization would have on key financial ratios.

The Entities Governing Accounting Standards in the United States

This article provides background on goodwill accounting under GAAP, the current issues under discussion in the ITC, and the potential financial statement impacts of a return to the amortization model for public business entities. Since the issuance of APB 24 in 1944, the subsequent accounting for goodwill has been debated constantly and evolved considerably. FASB’s recent ITC and the changes made with recent ASUs highlight the strong possibility of a move back to amortization of goodwill. A review of the current goodwill carried on the balance sheets of S&P 500 companies finds, as expected, that there would be a noticeable decline in companies’ earnings and earnings-based financial ratios if FASB were to revive goodwill amortization. With such a potentially significant financial statement impact, the possibility of a return to amortization raised in the ITC will likely meet intense comment and debate from preparers, users, and auditors. Determining how to account for the goodwill found in business combinations has been a hotly debated topic for decades.

• Edited by CPAs for CPAs, it aims to provide accounting and other financial professionals with the information and analysis they need to succeed in today’s business environment.
• The FASB developed the Generally Accepted Accounting Principles (GAAP), which is the current framework for accounting standards in the United States.
• There is a comparably steep decline in average EPS of $3.85 per share, from an average of $5.34 per share (as reported) to an average of $1.49 per share (pro forma).
• Determining how to account for the goodwill found in business combinations has been a hotly debated topic for decades.
• The introduction read that accounting “must be judged from the standpoint of society as a whole—not from that of any one group of interested parties.”

All FASB standards issued prior to the launch of the FASB Accounting Standards CodificationTM on July 1, 2009. A variety of exposure documents to solicit input on its standards-setting activities, such as Exposure Drafts, Discussion Papers, Preliminary Views, and Invitations to Comment. The FASB’s project plan, also referred to as its technical plan, lists the projects on the Board’s technical agenda and provides other information such as the expected timing of exposure documents, final standards, and public roundtable meetings.

The Four Levels of the GAAP Hierarchy

Later, in 1973, the Financial Accounting Standards Board (FASB) was established as the new independent standard-setting body in the U.S., replacing the APB. The FASB developed the Generally Accepted Accounting Principles accounting research bulletins (GAAP), which is the current framework for accounting standards in the United States. Over time, many of the ARBs were superseded or incorporated into the GAAP framework as accounting standards evolved.