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IFRS 5 — Reversal of disposal group impairment losses relating to goodwill

Date recorded:

The IFRIC discussed the request to consider the need for additional guidance on the recognition of reversal of disposal group impairment losses related to goodwill. In particular, the discussion focused on the differences between the requirements of IFRS 5 and IAS 36 and on the question whether the disposal group should be treated as a single asset or it was merely a group of individual assets and liabilities.

IFRIC members held divergent views. Some preferred the alternative that impairment loss should not be reversed as this answer would be consistent with the rest of the literature (IAS 36) as well as with the answer under the U.S. GAAP. Other IFRIC members on the other hand thought that impairment loss reversal should be recognised as the disposal group is one asset and guidance in IAS 36 relates to allocation rather than recognition of the impairment reversal.

One IFRIC member also noted that there are significant differences with the U.S. GAAP in scope of IFRS 5 and relevant Codification guidance and thus, in his opinion, a comparison with the answer under U.S. GAAP is not relevant when determining the proper accounting under IFRSs.

Another IFRIC member expressed her concerns about the application of the conflicting guidance in the current economic environment. In her opinion, those unclear requirements might lead to abuse.

Other IFRIC members noted that IFRS 5 is internally inconsistent and should be reviewed in its entirety. Moreover, in their opinion the issue was too significant for and interpretation or Annual Improvements process. Finally, IFRIC agreed with this reasoning. IFRIC decided not to add the issue to the agenda and, in light of the multiple submissions on IFRS 5, agreed to recommend that the Board to perform a full post-implementation review of IFRS 5.

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