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IASB publishes project update on goodwill and impairment related to business combinations

  • IFRS - IASB Image

Sep 10, 2019

On September 10, 2019, the International Accounting Standards Board (the Board) published an article by IASB member Tom Scott on the status of the Board's goodwill and impairment project following its post-implementation review of IFRS 3, "Business Combinations".

Within its goodwill and impairment project, the Board is investigating how companies can provide users of financial statements with better information about mergers and acquisitions (business combinations) at a reasonable cost. This investigation includes the challenging question of how companies should account for goodwill after the business combination.

The six-page article discusses the Board's preliminary views that:

  • "we should enhance disclosure objectives and requirements to improve the information provided to users about an acquired business and its subsequent performance, even if that information must be on a combined basis where the acquired business has been integrated into an existing business;
  • it is not feasible to make the impairment test significantly more effective at recognizing impairment losses of goodwill;
  • reintroducing amortization of goodwill would not provide significantly better information to users;
  • we should reduce the cost and complexity of the impairment test by providing relief from the mandatory annual quantitative impairment test for goodwill;
  • we should also reduce the cost and complexity of the impairment test by simplifying some of the requirements for estimating value in use;
  • we should not allow more intangible assets to be included in goodwill; and
  • we should enhance transparency by requiring companies to present total equity before goodwill in their balance sheets."

The article notes that the Board plans to issue a discussion paper on these issues at the end of 2019.

Review the press release and article on the Board's website.

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