The Financial Accounting Standards Board is proposing new updates to the Accounting Standards Codification around goodwill write-downs, business combinations, and revenue recognition for healthcare entities based on recommendations from its Emerging Issues Task Force.

In the proposal titled Intangibles – Goodwill and Other (Topic 350): How the Carrying Amount of a Reporting Unit Should Be Calculated When Performing Step 1 of the Goodwill Impairment Test, FASB and the EITF want to settle on one starting point for all companies to follow in deciding if goodwill needs to be written down.

Goodwill is an intangible asset that arises on corporate balance sheets when a company completes a merger or acquisition, assigns values to all the individual assets and liabilities, then still has an additional amount paid that needs to be recognized. It’s synonymous with the “synergy” of a company’s collective assets and liabilities. Accounting rules prescribe a two-part test that a company must perform to determine if the goodwill carried on a company’s balance sheet needs a haircut, a scenario faced by a lot of companies over the past few years through the financial crisis and recession.

Companies followed different approaches to satisfy the requirements for the two-part step, and FASB said some constituents raised concerns that the diversity in approaches didn’t always lead to the right answers. As such, with the codification update, FASB proposes to specify a single starting point for the two-part impairment analysis to assure companies are arriving at consistent outcomes and comparable financial results.

In the proposal titled Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations, FASB and the EITF want to shore up some different interpretations around how companies should present pro forma revenue and earnings disclosures for business combinations. Topic 805 already requires a public company to disclose pro forma information for business combinations that took place in the current reporting period, including revenue and earnings of the newly combined entity, as if they’d hooked up at the beginning of the reporting year.

Companies have followed different approaches, however, in rolling forward from the beginning of the annual reporting period to the period in which the merger or acquisition took place. The codification update would give more specific guidance to clarify how a company should present revenue and earnings for comparative periods to assure companies are providing truly comparable data, period to period and company to company.

Finally, the proposed guidance for healthcare entities is meant to address concerns that such companies recognize revenue without adequately reflecting legitimate concerns about how collectable it really is. The guidance would require such entities to make some additional disclosures about its allowance for doubtful accounts so investors can get a realistic view of how much of the company’s revenue will be collected.

FASB is accepting comments on all three proposals through Nov. 5.

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