Goodwill and Impairment

Date recorded:

Cover paper (Agenda Paper 18)

In March 2020, the IASB published DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment. The comment period for the DP ended on 31 December 2020.

In 2021, the IASB discussed the feedback received in response to the DP and decided to prioritise, amongst other things, performing further work to make decisions on the package of disclosure requirements about business combinations and to then redeliberate its preliminary view that it should retain the impairment-only model to account for goodwill.

The purpose of this meeting was to ask the IASB to move the project from the research programme to the standard setting work plan.

This paper was not discussed.

Moving to the standard-setting agenda (Agenda Paper 18A)

In this paper, the staff recommended that the IASB should move the project from its research programme to its standard-setting work plan, setting out how the criteria of the Due Process Handbook are met. The staff also recommend that the IASB do not establish a dedicated consultative group for the project, and change the title of the project to “Business Combinations—Disclosures, Goodwill and Impairment” to reflect the wider scope of the project.

The IASB was asked to vote on each of these recommendations.

IASB discussion

IASB members generally agreed with the staff recommendations. When asked to vote, for each recommendation, the IASB voted 11 in favour, with one absentee.

Identifiable intangible assets acquired in a business combination (Agenda Paper 18B)

As part of the Post-Implementation Review (PIR) of IFRS 3, some respondents provided feedback indicating concerns around the usefulness of information concerning the separation of acquired identifiable intangible assets from goodwill in a business combination. Considering these views, the IASB held the preliminary view to not change the recognition criteria for identifiable intangible assets acquired in business combination.

The staff recommended that the IASB maintain this preliminary view.

IASB discussion

IASB members generally agreed with the staff recommendation. When asked to the vote, the IASB voted with 11 in favour (one absentee) of the staff recommendation to retain the preliminary view.

Total equity excluding goodwill (Agenda Paper 18C)

As part of the DP, the IASB held the preliminary view that entities should present in the statement of financial position the amount of total equity excluding goodwill. Almost all respondents on this topic disagreed with this view.

The staff recommended that the IASB do not proceed with its preliminary view.

IASB discussion

IASB members generally agreed with the staff recommendation. When asked to the vote, the IASB voted with 11 in favour (one absentee) for the staff recommendation to not proceed with its preliminary view.

Other topics (Agenda Paper 18D)

In its May 2021 meeting, the IASB discussed respondents’ suggestions regarding additional topics to be considered as part of the Goodwill and Impairment project.

The staff recommended that the IASB does not include the additional topics suggested by respondents, except to consider the following topics when deliberating possible improvements to the effectiveness of the impairment test:

  • Requiring an entity to disclose goodwill by reportable segment
  • How the requirements of IAS 21 relating to the level at which goodwill balances are translated interacts with the level at which goodwill is tested for impairment applying IAS 36

IASB discussion

IASB members were generally in favour of the staff recommendation, not wanting to expand the scope of the project more than necessary.

It was highlighted that the interaction of IFRS 16 with the impairment test is proving to be a developing issue in Europe, and that it may therefore be worth considering the respondents’ feedback on this issue in the project’s scope.

When asked to vote, 10 voted in favour of the staff’s recommendation, with one absentee.

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