Goodwill and Impairment (IASB) and Identifiable Intangible Assets and Subsequent Accounting for Goodwill (FASB)

Date recorded:

Cover Paper (Agenda Paper 18)

The IASB has, and the FASB had, on their respective agendas projects covering the accounting for goodwill and intangible assets acquired in a business combination.

The purpose of this meeting was to provide an opportunity for FASB and IASB members to discuss:

  • The status of the respective projects
  • The subsequent accounting for goodwill—including the FASB’s progress with developing an amortisation-with-impairment model and recent decision to deprioritise and remove the project from its technical agenda, and the IASB’s research on this topic
  • The redeliberations of the IASB in relation to disclosures about business combinations.

The IASB and the FASB were not asked to make decisions at this meeting.

FASB: Recent Project Developments (Agenda Paper 18A)

The FASB staff brought the following topics to the FASB for deliberation:

  • Amortisation of goodwill
  • Goodwill impairment model
  • Accounting for identifiable intangible assets
  • Presentation of goodwill amortisation and impairment losses in the financial statements

The FASB provided the following leanings:

  • An entity should amortise goodwill on a straight-line basis.
  • An entity can amortise goodwill over a 10-year default amortisation period or it can elect another amortisation period if that period can be justified based on acquisition facts and circumstances (subject to a cap of 25 years)
  • An entity would not be permitted to reassess the amortisation period
  • Customer relationships that are not separable should be subsumed into goodwill
  • Goodwill should continue to be tested for impairment at the reporting unit level when indicators exist (minimum annual test requirement would be removed)
  • Goodwill amortisation and impairment losses should be presented as separate line items in the same location in the income statement

At its meeting on 15 June 2022, the FASB reviewed the package of leanings provided to date and decided to deprioritise and remove the project from its technical agenda.


FASB members updated the IASB as to why they had removed the project from the agenda. One of the main reasons why the FASB could not agree on a way forward was that they did not have a clear objective as to whether the project was to reduce cost or to increase benefits. The IASB Chair highlighted that the IASB would have to consider the objective of their project before making a decision on amortisation in November.

Some IASB members highlighted that stakeholders would prefer the accounting frameworks to remain converged with regard to goodwill, i.e. retain impairment-only in both frameworks. However, the focus should not be on convergence but on providing better information to stakeholders. IASB and FASB members had mixed views as to whether amortisation would indeed provide better information.

Proponents of impairment-only for goodwill cited investor groups who said that the annual impairment test was a good indicator as to whether an acquisition had been successful, and those groups therefore did not ask for amortisation. It would be difficult to compensate for the loss of that information.

In general, the FASB’s agenda consultation did not reveal a big interest in subsequent measurement of goodwill. Some said that amortisation was better information in theory, but in practice an appropriate amortisation period cannot be determined. In addition, the difference between market values of companies and their book values was big enough as it was, even without amortisation of goodwill.

IASB members asked whether the FASB had looked into ways to improve the impairment testing for goodwill. FASB members responded that they had but there was no clear answer. With regard to disclosures to improve information on goodwill impairment, FASB members said that the project did not get that far. As far as the research went, there were no evident disclosure requirements that would have been cost-beneficial.

One IASB member asked whether the FASB had discussed customer relationships and whether they could be separated from goodwill. A FASB member responded that their agenda consultation had shown that stakeholders thought these are not separable and should be subsequently measured together with goodwill.

IASB: Subsequent accounting for goodwill (Agenda Paper 18B)

Discussion Paper DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment set out the preliminary view not to reintroduce amortisation and instead retain the impairment-only approach. The DP asked for feedback that provides new practical and conceptual arguments, together with evidence for these arguments. The IASB asked stakeholders whether their views depend on whether the outcome would be consistent with US GAAP.

Respondents’ views on reintroducing amortisation remain mixed. Many respondents agreed with the preliminary view but many also disagreed, saying amortisation of goodwill should be reintroduced. The agenda paper sets out a summary of feedback received, reasons for reintroducing amortisation and reasons for retaining the impairment-only approach.

Since the last joint FASB-IASB meeting, the IASB staff conducted further research on the useful life of goodwill and on transition to an amortisation-based model. The agenda paper provided the detail of that research.

IASB: Disclosures about business combinations (Agenda Paper 18C)

The DP set out the following preliminary views:

  • Add additional disclosure objectives to IFRS 3 that would require entities to disclose information that would help users of financial statements understand:
    • The benefits an entity expected from a business combination when agreeing the price to acquire that business
    • The extent to which management’s objectives are being met
  • Require entities to disclose in the year of a business combination, the strategic rationale and objectives for that business combination and the metrics management plan to use to monitor achievement of those objectives
  • In subsequent years, disclose management’s review of the entity’s performance against those objectives
  • The information that would be disclosed is the information an entity’s Chief Operating Decision Maker (CODM) is reviewing to assess the performance of the business combinations that the CODM is reviewing
  • Require entities to disclose in the year of a business combination quantitative information about the synergies expected as a result of the business combination

Many respondents, including almost all users, agreed with the preliminary views. However, many respondents, including almost all preparers, disagreed. Respondents identified practical challenges with the preliminary views. The agenda paper provides detail of that feedback.

The IASB staff provided an overview of the practical concerns raised in response to the DP, summary of feedback received on the management approach and the location of the information.

In October 2021, the IASB tentatively decided that, based on the Conceptual Framework, information can be required in financial statements about the benefits an entity’s management expects from a business combination and the extent to which management’s objectives are being met. However, in October 2021, the IASB also acknowledged that there may be practical reasons for not proceeding with some or all of the preliminary views.

In Q4 2021 and Q1 2022, the IASB staff tested examples illustrating the information an entity would disclose applying the preliminary views. The IASB staff tested the examples with various stakeholders, including members of the IASB’s consultative groups. The IASB discussed various alternatives to its preliminary views that may help better balance the cost and benefits and result in the IASB proceeding with an amended version of its preliminary views.

In April 2022, the IASB discussed two variables that can be adjusted to better balance the costs and benefits of any proposed requirements:

  • The population of business combinations for which information would be disclosed
  • The amount of information to be disclosed for each affected business combination

The IASB is expected to make a tentative decision as to how to proceed with improving disclosures about the subsequent performance of business combinations and expected synergies at its September 2022 meeting.

IASB: Staff examples (Agenda Paper 18D)

This agenda paper contained staff examples illustrating what the IASB staff expect an entity might disclose if the IASB were to make its preliminary views in the DP a requirement in IFRS Standards.

IASB: September 2022 decisions on disclosures about business combination (Agenda Paper 18E)

This agenda paper gave information about decisions made by the IASB in its September 2022 meeting.

In particular, the IASB tentatively decided to require disclosure about the objectives, metrics, targets and actual performance of business combinations for only a subset of business combinations. A subset would be intended to capture strategically important business combinations (that is a business combination, which if it fails to achieve its objective(s) would seriously jeopardise the entity’s achievement of its strategy).

The IASB also tentatively decided to exempt an entity from disclosing, in specific circumstances, information about the objectives, metrics and targets for a business combination and quantitative information about expected synergies.


The IASB papers were discussed together.

The main discussion point was the exemption the IASB tentatively decided to provide with regard to disclosures that are commercially sensitive. IASB members asked whether the FASB had discussed a similar exemption. FASB members responded that they had not for the goodwill project, but they discussed it in other projects like segments. They found that such an exemption was difficult to operationalise as it is open for abuse. It would also be difficult for auditors and regulators to enforce.

IASB members agreed with that and said that the intention was to set a very high hurdle, almost like a rebuttable presumption, for this exemption. The exemption was also only available for forecast figures and not for actual figures.

There could also be a sunset clause where management would have to state how long they are intending to apply the exemption. If that period were to be extended, management would have to give compelling reasons for this. One IASB member said that in general, disclosures around the exemptions would have to be structured in a way that makes it almost impossible to abuse the exemption. One IASB member reminded the participants that the proposed exemption will be exposed and shareholders will be able to comment.

On a different note, a FASB member asked whether the IASB would be prepared to split the amortisation part of the project from the disclosure part of the project if they ran into similar difficulties as the FASB. The IASB Chair confirmed that they are prepared to do so if necessary.

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