The Financial Accounting Standards Board is expecting to publish a new accounting rule in September that will make it quicker and easier to determine whether goodwill must be written down.

FASB is putting the finishing touches on the language to an accounting standards update that will allow a company to make a judgment call about whether goodwill needs a haircut before lifting a pencil on any detailed calculations. The amendment to the existing goodwill requirements will say a company can make a qualitative assessment about the need for a write-down before proceeding to the existing quantitative, two-step test.

Goodwill is an intangible asset that appears on corporate balance sheets as a result of mergers and acquisitions. It represents the amount a company pays to acquire a company after fair values are assigned to the individual assets and liabilities acquired in a transaction. Under existing accounting rules, companies are required to perform a two-step test annually any goodwill carried on their balance sheet to determine whether it is impaired, or in need of a write-down.

The new guidance may come as small comfort to companies that have already flushed billions of dollars off their balance sheets the past few years as a result of the recession and market volatility. According to a study by valuation firm Duff & Phelps, public companies took goodwill impairments of nearly $270 billlion from 2007 through 2009 after recording only $6 billion in impairments in 2006 and $2 billion in 2005. Impairments spiked most dramatically in 2008 at $188 billion, the study said.

When it is published, the new guidance will tell companies they can begin the goodwill impairment assessment by making a judgment call about whether it is more likely than not that the fair value of the reporting unit is less than the amount carried on the books. If the answer is no, then the company can put down the pencil. If the answer is yes, then it must proceed with the existing two-step test, which will not change under the new guidance.

FASB member Daryl Buck said in a statement the board developed the guidance as a result of private company concerns over the cost and complexity of the existing test method. “The amendments approved by the board address those concerns and will simplify the process for public and nonpublic entities alike,” he said.