ASBJ publishes research paper on the amortisation of goodwill

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19 May, 2015

The Accounting Standards Board of Japan (ASBJ) has published the Research Paper No.1 'Research on Amortisation of Goodwill' with a view to make a contribution to the global discussion regarding how goodwill should be accounted for.

The research paper provides preliminary results of the research by the staff of the ASBJ into the following aspects:

  • Review of public disclosures regarding the accounting practice of how to determine goodwill amortisation periods under the Japanese accounting standards;
  • Suvery to find recent accounting practices of major Japanese listed companies relating to goodwill amortisation;
  • Limited review of academic literature; and
  • Discussion with financial statements users in Japan regarding their views on the amortisation of goodwill.

Based on these research activities, the paper notes the following observations:

    1. The review of public disclosures and responses to the survey from major Japanese listed companies indicated that 5 years was often estimated as the amortisation period for many business combinations. However, for goodwill arising from larger scale business combinations, many companies estimated longer periods (such as 10 years and 20 years) to reflect the longstanding effect that the goodwill is expected to have.
    2. As a result of the review of academic literature, the ASBJ staff found that, at least, it is difficult to immediately conclude that the impairment-only approach is superior to the amortisation and impairment approach.
    3. The majority of Japanese financial statement users expressed support for the amortisation and impairment approach.

The ASBJ anticipates that this paper will inform the work jointly carried out by the ASBJ, EFRAG and the OIC with regard to how goodwill should be accounted for and disclosed. The ASBJ also hopes that the paper will help stimulate the global discussion of accounting requirements for goodwill.

Please click to download the paper from the ASBJ website.

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