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com
Goodwill
Impairment
By Marlon Bernal, Principal
T
he Financial
Accounting
S t a n d a r d s
Board (FASB)
has issued an
update to U.S.
generally ac-
cepted account-
ing principles
(GAAP) that provide an alternative
for private companies on the sub-
sequent accounting for goodwill.
The update is a consensus of the
Private Company Council (PCC)
that was endorsed by the FASB.
FASB Accounting Standards Up-
date No. 2014-02, Intangibles
Goodwill and Other (Topic 350):
Accounting for Goodwill, allows a
private company to subsequently
amortize goodwill on a straight-
line basis over a period of ten
years, or less if the company can
demonstrate that another useful
life is more appropriate. It also al-
lows a private company to apply a
simplified impairment model to
goodwill. Goodwill is the residual
asset recognized in a business
combination after recognizing all
continued on page 2
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For more information,
please contact Jim Peacock
at jpeacock@uhy-us.com
Government
Contractor
Insider
UHY LLP
Mid-Atlantic
April 2014 Vol. 5 No. 3
UHY L L P pr ov i de s s ol ut i ons t o gov er nme nt
c ont r a c t or s i n ac c ount i ng, t a x and c ons ul t i ng.
accounting rules on what to capital-
ize and what to expense.
Website devel-
opment costs
can generally
be divided
into various
stages. The
f o l l o wi ng
table summa-
rizes the ac-
counting treatment
for the most common activities in
each stage. The table is based on
FASB ASC 350-50 IntangiblesGood-
will and Other: Website Develop-
ment Costs. It is intended as an
overview and exceptions may apply.
Ask your website development con-
sultant to provide a breakdown of
their fees based on this table (see
page 2). Imagine the delight of your
auditors when they see the spectac-
ular job youve done of properly ac-
counting for your website develop-
ment costs!
continued on page 2
Website Development Costs
A detailed look at what to
expense and what to capitalize
By Cindy McGiffin, Senior Accountant
A
n area of con-
fusion I see
frequently on au-
dits is the treat-
ment of website
d e v e l o p m e n t
costs. Clients tend
to place their en-
tire website devel-
opment costs in one bucket, either
expensingor capitalizingevery-
thing. The correct treatment is some-
where in the middle, and knowing
which activities are which is impor-
tant. Fortunately, there are detailed
Imagine the delight of your
auditors when they see
the spectacular job
youve done of properly
accounting for your
website development costs!

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Goodwill Impairment
continued from page 1
other identifiable assets acquired
and liabilities assumed.
For years, private company stake-
holders have made the goodwill
impairment issue a priority given
its onerous and costly compliance
efforts. The new standard ad-
dresses private company stake-
holder concerns by reducing the
cost and complexity of compliance,
while still providing decision-useful
information for users of private
company financial statements.
Under the accounting alternative,
goodwill is tested for impairment
when a triggering event occurs
that indicates that the fair value
of a company (or a reporting unit)
is lower than its carrying value. A
private company that elects the
accounting alternative is further
required to make an accounting
policy election to test goodwill for
impairment at either the company
level or the reporting-unit level.
The combination of the amortiza-
tion method and the relief from
the requirement to test goodwill
for impairment at least annually is
expected to result in significant
cost savings for many private com-
panies that carry goodwill on
their balance sheets. This is be-
cause amortization should reduce
the likelihood of impairments,
and private companies generally
will test goodwill for impairment
less frequently.
We at UHY LLP are here to help
you implement the accounting al-
ternative for goodwill.
Stage Activities Treatment
Planning IDeveloping the Expense
business/project plan
IDetermining functionalities
IIdentifying hardware and
web applications/software
IConceptual formation of
graphics and content
ISelection of vendor(s)
Application and IAcquiring or developing hardware Capitalize
Infrastructure and software needed to operate
Development the website
IObtaining domain name
IDeveloping or acquiring the software
for website operations, database
and applications
IPurchasing the hardware
IInstalling the hardware/software
ITesting the hardware/software
Graphics IOverall design of web pages Capitalize
Development (design, layout, color, images)
Content IData entry and data conversion Expense
Development of content
ISoftware used to integrate a Capitalize
database with the website
Operating Stage ITraining employees on the new website Expense
IRegistering the website with internet
search engines
IUser administration activities
IBackups
IOn-going maintenance
IUpgrades and enhancements that Capitalize
increase functionality
Website Development Costs, continued from page 1