The Financial Accounting Standards Board has had another change of heart regarding the treatment of goodwill in M&A transactions. Last week, FASB proposed an "impairment" approach to goodwill in place of the amortization approach it had insisted on in its 1999 proposal, which was to have come into effect next month.

The new rules would require a company to expense purchased goodwill against earnings only during periods in which the recorded goodwill value is more than its fair value. Such a rule could result in the large one-time charges that FASB was hoping to avoid in its 1999 proposal; however, such charges would not be taken upfront. The decision also signifies that FASB is recognizing that goodwill is not simply a wasting asset.