October 2022

UKEB introduces research on goodwill subsequent measurement at IFASS meeting

Oct 07, 2022

At the meeting of the International Forum of Accounting Standard Setters (IFASS) held in London in September, a representative of the UK Endorsement Board (UKEB) introduced the recent research report "Subsequent Measurement of Goodwill: A Hybrid Model".

The UKEB representative noted that the research objective of the UKEB's goodwill research project is to contribute to the ongoing international debate on the subsequent measurement of goodwill by exploring the practical implications of a potential transition to a hybrid model consisting of an annual amortisation charge, combined with impairment testing that would take place only when there was an indicator of impairment, and supporting disclosures to increase management accountability for acquisitions.

The research explored the effects of the application of the impairment-only model for UK IFRS reporters from 2005 to 2021. It found that:

  • The carrying amount of goodwill in the FTSE 350 increased from £227 billion in 2005 to £397 billion in 2021.
  • A total of 228 companies in the FTSE 350 reported goodwill in 2021, representing on average 18% of total assets and 63% of net assets.
  • Current disclosures on goodwill and impairment provide limited insight into the age of goodwill or the acquisitions that led to its recognition on companies’ balance sheets.

The research also indicated that a transition to a hybrid model would be practically feasible as the majority of preparers involved in the outreach believe it is possible to estimate a useful life for goodwill through consideration of a range of relevant factors and if sufficient application guidance is provided. They also believed that suitable transition arrangements could be provided for legacy goodwill. No significant adverse consequences for financial stability or for processes, operations or costs were identified.

Feedback from outreach participants also revealed that the following benefits from a hybrid model could be anticipated:

  1. More faithful representation of underlying economics by reflecting the consumption of economic benefits (although not all stakeholders agree that goodwill is a wasting asset).
  2. Reduced impact of the shielding effect because the hybrid model would require management tracking of goodwill on an acquisition by acquisition basis.
  3. Improved comparability between entities that grow organically and those that grow through acquisition.
  4. Disclosure of management assumptions underpinning the estimate of useful life would increase management accountability for acquisitions.
  5. Potential cost savings as impairment testing will be done on an indicator only basis (potentially offset by cost of monitoring useful life of goodwill).

Review the full research report on the UKEB's website.

Updated IASB and ISSB work plan — Analysis (October 2022)

Oct 25, 2022

On October 25, 2022, the International Accounting Standards Board (the Board) and the International Sustainability Standards Board (ISSB) updated its work plan following its October 2022 meeting.

Below is an analysis of all changes made to the work plan since our last analysis on September 26, 2022.

Stan­dard-set­ting projects

Main­te­nance projects

  • Amendments to the classification and measurement of financial instruments —This project has been newly added to the work plan. It responds to feedback received on the Post-implementation review of IFRS 9 — Classification and measurement and also incorporates the project on Con­trac­tual cash flow char­ac­ter­is­tics of financial assets. An exposure draft is expected in the first half of 2023.
  • Lease liability in a sale and leaseback — This project has now been removed from work plan. The September 2022 work plan had still listed this project although it had been concluded by the issuance of final amendments.
  • Non-current liabilities with covenants (Amendments to IAS 1) — Final amendments are now expected in October 2022 (previously November 2022).

Research projects

Other projects

The revised IASB and ISSB work plan is available on the Board's website.

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