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Regulations made prohibiting the reversal of goodwill impairment

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15 Sep 2015

The Companies, Partnerships and Groups (Accounts and Reports) (No. 2) Regulations 2015 (SI 2015/1672) (“the Regulations”) come into force on 1 October 2015.

The Regulations transpose into UK law the prohibition on upwards revaluations of goodwill in the EU Accounting Directive 2013/34/EU where its value had been previously impaired in a company’s accounts.  The effect of the amendments is that, where provision for diminution in value has been made in respect of goodwill and the reasons for which that provision was made have ceased to apply to any extent, the provision must not be written back to any extent. 

The July 2015 amendments to section 27 of Financial Reporting Standard (FRS) 102 are consistent with this change in law. However, prior to adopting the amendment to the law, the previous requirements of FRS 102 (which allowed reversals of impairment of goodwill “if and only if the reasons for the impairment loss have ceased to apply”) continue to apply.

These amendments apply for financial years beginning on or after 1 January 2016.  However a company that has chosen to early adopt the amendments made by ‘The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 (SI/2015/980)’ must also adopt these amendments as well.

The Regulations are available here (link to statutory instrument).

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