Goodwill and impairment

Date recorded:

Goodwill and Impairment - Agenda paper 18


This project was undertaken as a result of the feedback received on the post-implementation review of IFRS 3. The purpose of this session was to recap the approaches developed so far in relation to how changes could be made to the existing impairment model in IAS 36 as well as the subsequent accounting of goodwill, and the progress made by the FASB on a similar project since June 2016 when the two Boards last discussed this topic.

See the October 2015 to June 2016 Agenda Paper 18 series for details of these approaches.


This project focuses on the following areas:

  • (a) whether changes should be made to the existing impairment testing requirements in IAS 36;
  • (b) subsequent accounting for goodwill (including the relative merits of an impairment-only approach and an amortisation and impairment approach); and
  • (c) whether any intangible assets currently required by IFRS 3 to be separately identified could be subsumed into goodwill for cost/benefit reasons.

The objectives of the project are to simplify the impairment testing model to reduce the cost of applying it without making it less robust, and to make it more effective by recognising impairment losses at the appropriate time and amounts, supplemented by appropriate disclosures. Preliminarily approaches considered by the Staff in achieving these objectives include the following:

  • (a) Using a single method to determine the recoverable amount: to use either fair value less costs of disposal, value-in-use (VIU), or a method that reflects how the entity expects to recover the asset.
  • (b) Relief from annual testing: to test only when there is an indication of impairment.
  • (c) Changes to the VIU methodology: reconsidering whether it is still appropriate to use a pre-tax discount rate and to exclude the estimated future cash flows expected to arise from improving the asset’s performance from the VIU calculation.
  • (d) To include a pre-acquisition headroom amount in the recoverable amount of a CGU to prevent any downward movements in acquired goodwill being absorbed by unrecognised internally generated goodwill, resulting in acquired goodwill not being impaired appropriately.

Next steps

The Staff plans to present further analysis on each of the proposed approaches for discussion by the Board in 2017.


There was not any significant technical debate in the session. As previously agreed by the Board, the Staff reconfirmed that they will not be performing any further analysis on the amortisation of goodwill approach, and will instead focus on how to improve the effectiveness of the existing impairment model and the related disclosures. A couple of Board members noted that the Staff will have to do a lot more analysis on the pre-acquisition headroom concept to see whether it is workable, and cautioned against creating more complexity with this approach when one of the objectives of the project is to simplify the impairment assessment.

One Board member in particular believed that the Staff’s work plan is unnecessarily drawn out with lots of analyses and consultations when he doesn’t believe that they would result in any ground breaking improvements to how one assesses impairment.

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