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FEE comments on the Request for Information on the post-implementation review of IFRS 3

  • FEE (Federation of European Accountants - Fédération des Experts-comptables Européens) (lt green) Image

20 May 2014

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has commented on the IASB's Request for Information (RFI) seeking comments from stakeholders to identify whether IFRS 3 'Business Combinations' provides information that is useful to users of financial statements; whether there are areas of IFRS 3 that are difficult to implement and may prevent the consistent implementation of the standard; and whether unexpected costs have arisen in connection with applying or enforcing the standard.

FEE is one of the first respondents to the RFI published in January 2014 that contained technical questions regarding eight areas of which two are given special prominence in FEE's comment letter. Judging from publicly observable sessions at national and regional standard-setters, these issue cause the most discussion generally.

FEE agrees that one of the key issues to be addressed as part of the post-implementation review is whether the differentiated treatment for acquisitions of assets as opposed to acquisitions of business is justified. In this context, FEE points out that under certain circumstances and in certain industry sectors distinguishing between assets and businesses might pose significant practical difficulties. FEE therefore believes that the IASB needs to provide a clearer definition of a business.

Regarding the topic of an annual impairment review of goodwill and indefinite-life intangible assets, as opposed to amortisation, FEE admits that it originally supported the requirement when it was introduced into IFRS 3 Business combinations. However, FEE states that since the implementation of that requirement significant issues arising from the practical application of annual impairment reviews have become obvious. At the same time, FEE points out that there are also problems with the amortisation approach that the introduction of the annual impairment review was originally intended to address. Therefore, some FEE members still support the requirement as the "least-worst" option while others favour amortisation of goodwill. According to FEE, this split of opinions shows "that there is a need for the IASB to further research the comparative merits of both the impairment only and amortisation approaches".

Please click for access to the full comment letter on the FEE website.

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