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UK Endorsement Board secretariat publishes final comment letter on the IASB’s DP/2020/1 Business Combinations, Disclosures, Goodwill and Impairment

  • UK Endorsement Board (UKEB) Image

05 Feb 2021

The UK Endorsement Board secretariat has published its final 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 final 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.

For more information, see the response letter on the UKEB's website.  A feedback statement summarising the main comments received by the UKEB and how those views were reflected in the final comment letter submitted to the IASB is available on the UKEB website here.

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