The COVID-19 pandemic substantially impacted peoples’ health and many organizations’ current and future financial performances. The financial impact was shown on the estimated earnings and the cash flow projections. Therefore, goodwill impairment has created interest in financial reporting since the pandemic started. Many companies have resolved to take a new perspective concerning goodwill impairment during the pandemic. Deteriorating general economic conditions that negatively impact earnings and cash flow have also necessitated the significance of the goodwill impairment test for many companies. Companies were affected differently by the pandemic; for illustration, people had increased demand for the services of large technology companies, while the restaurant had a decreased need for their services. During the COVID-19 pandemic, organizations also realized the essence of frequent and timely communication between the audit committee, the board, and the management. The management was also closely concerned about the timing and content of external communication entailing goodwill impairment.
An essential component of goodwill impairment analysis is evaluation, determined by the quality of the projections. Personnel preparing the financial statements had forecasting challenges mainly because the past performance was not a better indicator of the future results. For example, the previous economic downfalls, such as the 2008 estate crisis, do not give an interpretation of the current pandemic scenario. Therefore, valuation experts and companies decided to use a scenario-based focus; many projection results are developed with proper weighing on each scenario. Financial Accounting Standards Board (FASB) has been undergoing projects to provide optional relief to privately-owned companies and dynamically change accounting for goodwill. In one project, FASB permitted not-for-profit organizations and private companies the option to do a goodwill impairment, prompting event valuation at reporting date any period they report financial information. The second project is still in the earlier stages and has a broader scope. The current project aims to reexamine the consequent accounting for goodwill and certain identifiable immaterial assets.