IASB completes post-implementation review of IFRS 3

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17 Jun 2015

The IASB has completed its post-implementation review (PIR) of IFRS 3 'Business Combinations'. The review concluded that there is general support for IFRS 3 and its related Standards; however, there are several aspects where additional research is needed.

The PIR report assessed in­for­ma­tion gathered from academic lit­er­a­ture as well as feedback from (1) investors and other financial statement users and (2) preparers, auditors, and reg­u­la­tors. It showed general support for the “usefulness of reported goodwill, other intangible assets and goodwill impairment.” However, views were mixed on certain elements of the standard, including the following:

For investors

  • Subsequent accounting for goodwill.
  • Separate recognition of intangible assets.
  • Measurement of non-controlling interests
  • Subsequent accounting for contingent consideration.

For preparers, auditors, and regulators

  • Definition of a business.
  • Fair value measurement.
  • Impairment test for goodwill.
  • Contingent payments to selling shareholders who become employees.

The area of amortisation of goodwill was recently covered in a research paper by the Accounting Standards Board of Japan (ASBJ) and an earlier discussion paper by a joint-research group which included the ASBJ, EFRAG, and OIC to provide their observations on the topic in order to stimulate a global discussion.

On the basis of the PIR report, the IASB added to its agenda two research projects that will focus on:

  • Effectiveness and complexity of testing goodwill for impairment.
  • Subsequent accounting for goodwill.
  • Challenges related to applying the definition of a business.
  • Identification and fair value measurement of intangible assets such as customer relationships and brand names.

For more information, see the press release and the PIR report on the IASB’s website. In addition, see our project page on the PIR of IFRS 3.

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