UK Endorsement Board secretariat publishes draft comment letter on the IASB’s DP/2020/1 Business Combinations, Disclosures, Goodwill and Impairment
16 Jan, 2021
The UK Endorsement Board secretariat has published its draft comment letter on the International Accounting Standard Board’s (IASB's) Discussion Paper (DP) 2020/1 'Business Combinations: Disclosures, Goodwill and Impairment'.
The Discussion paper introduces possible improvements to the information companies report about acquisitions of businesses to help investors assess how successful those acquisitions have been. The Discussion Paper also seeks feedback on how companies should account for goodwill arising from such transactions.
In its draft comment letter the UK Endorsement Board’s secretariat:
- Proposes a mixed model for accounting for goodwill, in which an annual amortisation charge is supported by indicator-based impairment testing.
- Suggests possible methods for establishing the useful life of goodwill in the amortisation calculation.
- Supports moving to an indicator-only impairment model for goodwill only if amortisation is reintroduced.
- Seeks further stakeholder input on anticipated cost savings of moving to an indicator-only impairment test for goodwill.
- Supports the IASB’s proposed simplifications to the impairment test and makes additional recommendations to reduce risks of shielding and management optimism.
- Supports the principle of improved disclosures on acquisitions but recommends the IASB undertake illustrative examples and field-testing.
Comments on the draft comment letter are requested by 25 January 2021. For more information, see the press release on the UKEB's website.