Cover paper (Agenda Paper 18)

In March 2020, the IASB published Discussion Paper DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment. The comment period for the DP ended on 31 December 2020.

In 2021, the IASB discussed the feedback received in response to the DP and decided to prioritise, amongst other things, performing further work to make decisions on the package of disclosure requirements about business combinations and to then redeliberate its preliminary view that it should retain the impairment-only model to account for goodwill.

In December 2022, the IASB agreed to move the project from the research programme to the standard-setting work plan.

The purpose of this meeting was to ask the IASB to make decisions about remaining technical aspects of the project and to ask the IASB for permission to ballot an exposure draft (ED).

Interaction with the IASB’s project Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures (Agenda Paper 18A)

In this paper, the staff set out their analysis and recommendations regarding whether subsidiaries without public accountability should be required to disclose the information that would be required by the tentative decisions made by the IASB during this project.

Based on their analysis, the staff recommended that eligible subsidiaries should be required to disclose:

• The strategic rationale for undertaking a business combination
• Whether the discount rate used to calculate value in use is pre- or post-tax

The staff also recommended that eligible subsidiaries should not be required to disclose any of the other information that would be required by the tentative decisions made by the IASB during this project.

IASB discussion

This topic was discussed in the ‘Subsidiaries without Public Accountability: Disclosures’ session.

Transition and first-time adopters (Agenda Paper 18B)

In this paper, the staff set out its recommendations regarding transition requirements for the proposed amendments to IFRS 3 and IAS 36.

The staff recommended that the IASB:

• Requires an entity to apply the proposed amendments to IFRS 3 to business combinations for which the acquisition date is on or after the effective date of the amendments, with earlier application permitted
• Requires an entity to apply the proposed amendments to IAS 36 to impairment tests on or after the effective date of the proposed amendments, with earlier application permitted
• Does not provide a specific exemption regarding the proposed amendments for first-time adopters
• Requires an eligible subsidiary to apply the proposed amendments to the Subsidiaries without Public Accountability: Disclosures Standard prospectively from the effective date of the amendments, with earlier application permitted.

IASB discussion

IASB members generally agreed with the staff recommendations. There was some discussion regarding the interaction between the proposed amendments and voluntary application of the staff recommendations to business combinations occurring before the date of application, and whether it should therefore be clarified that retrospective application should be applied consistently to all relevant historical business combinations rather than a “cherry-picking” approach. Some IASB Members highlighted that overarching requirements in IAS 1 should preclude such an approach.

IASB decisions

When asked to vote on the staff recommendation to apply the proposed amendments to IFRS 3 to business combinations for which the acquisition date is on or after the effective date of the amendments, the IASB voted unanimously in favour.

When asked to vote on the staff recommendation to permit early application, 13 of the 14 members of the IASB voted in favour.

When asked to vote on the staff recommendations to require an entity to apply the proposed IAS 36 amendments to impairment tests on or after the effective date of the proposed amendments, with earlier application permitted, 13 members of the IASB voted in favour.

When asked to vote on the staff recommendation to not provide a specific exemption regarding the proposed amendments for first-time adopters, the IASB voted unanimously in favour.

When asked to vote on the staff recommendations to require an eligible subsidiary to apply the proposed amendments to the Subsidiaries without Public Accountability: Disclosures Standard prospectively from the effective date of the amendments, with earlier application permitted, the IASB voted unanimously in favour.

Due process and permission to begin the balloting process (Agenda Paper 18C)

In this paper, the staff outlined the background of the project and its proposals, and consider whether the project objective has been met.

The staff also outlined the due process that has been followed by the IASB in developing the proposals and propose a comment period of 120 days for the ED of proposed amendments to IFRS 3 and IAS 36.

Finally, the IASB was asked if it agrees with the staff recommendation to allow a 120-day comment period for the ED, if any IASB members intend to dissent from the proposals, and if the IASB is satisfied that it has complied with due process and therefore gives permission to begin the process for balloting the ED.

IASB decisions

IASB members were generally supportive of the staff recommendation to allow a 120-day comment period. When asked to vote on this recommendation, the IASB voted unanimously in favour.

When asked if any IASB members intended to dissent, none did. However, one IASB member noted that the compromise reached in the decisions taken to date is delicate and that assent is contingent on the final presentation in the ED.

When asked to vote on permission to ballot, the IASB voted unanimously in favour.