The Scope and Content of FAS 142
Under FAS 142, the fair value of an asset is compared to its book value including goodwill. The measurement of fair value is the amount at which an asset could be sold in an "arm length" transaction between willing and unrelated parties. If the book value is below the fair value assessment, there will be no impairment loss. If the fair value is below the book value, the asset is impaired and the company must write down the asset.

The impact of this rule on financial statements will vary from company to company. For example, companies that have made acquisitions and have goodwill on their balance sheets will no longer be forced to take regular charges against their earnings for goodwill amortization associated with the purchase. As a result, their reported earnings should go up.

The American Institute of Certified Public Accountants (the AICPA) opposed this approach to accounting for goodwill and other intangible assets. Mark Sever, Chair of the Accounting Standards Executive Board and Jan Hauser, Chair of the Business Combinations Task Force expressed their concerns and their disapproval over what would become SFAS 142 in response to a solicitation of comments by the Financial Accounting Standards Board to the Exposure Draft of the proposed accounting change. Sever and Hauser (2001) commented that:

"Goodwill is an asset that results from the allocation of purchase price and declines in value over time. Accounting and financial reporting should recognize that diminu

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