ASC 350-980
Regulated Operations
350 Intangibles—Goodwill and Other
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This subtopic applies Topic 350's goodwill and intangibles guidance to entities with regulated operations. Its core rule is that goodwill is not amortized and is tested for impairment under Topic 350 unless a regulator permits amortization of goodwill as an allowable cost for rate-making purposes, in which case the regulator's action provides reasonable assurance of a regulatory asset that is amortized over the period allowed for rate-making. It also addresses long-term power sales contracts acquired in a business combination and the need to review such contracts for loss-contract status.
Key points (7)
- Goodwill generally shall not be amortized and shall be tested for impairment in accordance with Topic 350, even for entities with regulated operations (350-980-35-1).
- A regulator may permit amortization of purchased goodwill over a specified period, direct that goodwill not be amortized, or direct a write-off of goodwill for rate-making purposes (350-980-35-1).
- If the regulator permits all or part of goodwill to be amortized as an allowable cost for rate-making, that action provides reasonable assurance of a regulatory asset (see 980-340-25-1), which is then amortized for financial reporting over the period allowed for rate-making (350-980-35-2).
- Absent such regulatory action, goodwill is not amortized and is accounted for under Topic 350 (350-980-35-2).
- A long-term power sales contract not accounted for as a derivative under Topic 815 must be periodically reviewed to determine whether it is a loss contract requiring immediate loss recognition (350-980-35-3).
- For long-term power sales contracts acquired in a purchase business combination, a premium for a contractual rate in excess of the current market rate is amortized over the remaining portion of the respective portion of the contract (for example, over the remaining fixed or scheduled period) (350-980-35-4).
- The scope follows Section 980-10-15, and paragraph 980-605-25-15 addresses power sales contracts meeting the definition of a derivative (350-980-15-1; 350-980-35-5).
For students. The key insight is that rate regulation does not create an exception to the no-amortization rule for goodwill itself; instead, the regulator's allowance converts the recoverable amount into a regulatory asset that is amortized. Students often mistakenly say regulated entities may simply amortize goodwill.
Machine-generated study aid for ASC 350-980. Check the source paragraphs below.
350-980-05Overview and Background
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350-980-15Scope and Scope Exceptions
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Overall Guidance
350-980-35Subsequent Measurement
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