When is the amortization of goodwill proposed to take place as per ASU 2014-02?

Under ASU 2014-02, goodwill is allowed to be amortized over a period not to exceed 10 years. This amendment provides a simplified approach for private companies, allowing them to amortize goodwill on a straight-line basis, making financial reporting less cumbersome compared to the more complex impairment testing required under the previous standards.

The rationale for permitting amortization over a 10-year period reflects a recognition that goodwill often has a finite life. Amortizing it over a relatively longer period allows businesses to systematically allocate the cost of goodwill, aligning it with the benefits derived from acquisitions over time.

In contrast, the other options suggest shorter periods, an option based on company discretion, or outright disallowance of amortization. However, ASU 2014-02 specifically establishes the 10-year amortization limit, emphasizing that this guideline was intended to simplify financial reporting for private companies while still recognizing the valuable nature of goodwill in business acquisitions.