IOSCO consults on goodwill
23 Jun 2023
The International Organization of Securities Commissions (IOSCO) has published a consultation on goodwill, seeking inputs from market participants to identify good practices for addressing the risk of unrecognized impairment on accumulated goodwill balances and related disclosures arising from business combinations.
IOSCO has been watching goodwill accounting closely in the past. In February 2021, IOSCO called on IASB and FASB to collaborate on goodwill accounting and in November 2022 IOSCO released a statement emphasising issuers’ need for fair, transparent and timely disclosure about impacts of economic uncertainty. In that statement, IOSCO noted that, as economic circumstances evolve and change, it is critical for management to carefully assess the latest economic environment where issuers operate and reflect it in the assumptions used in the accounting estimates, including goodwill impairment tests.
The consultation states:
From the viewpoint of investor protection, it is crucial that the application of financial reporting standards results in the fair presentation of the financial position, performance and cash flows of the company, that the goodwill is not stated in excess of its recoverable amount, and that impairment losses are recognised in a timely manner.
We support the IASB’s initiative to enhance disclosures that provide investors with better information about the performance of an acquisition and more effectively hold management to account for its acquisition decisions. We also support the IASB’s initiative to improve the impairment tests.
Securities regulators believe that goodwill accounting should continue to be a focus in the coming years, in light of the current global macroeconomic environment and we ask stakeholders to respond to this consultation to provide additional information to better inform the standard-setting process and to address issues that may arise in practice.
The consultation is open for comments until 20 September 2023. The feedback received will be used to formulate a set of recommendations for regulators, auditors, issuers and those charged with governance. They will also underpin IOSCO’s engagement with standard setters, including the IASB, on improvements to accounting, reporting and disclosure requirements related to goodwill.
Please see the following additional information on the IOSCO website:
