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IASB publishes discussion paper on goodwill and impairment

19 Mar 2020

The International Accounting Standards Board (IASB) has published a comprehensive discussion paper DP/2020/1 'Business Combinations — Disclosures, Goodwill and Impairment'. The IASB's related project aims at improving the information companies provide to investors, at a reasonable cost, about the businesses those companies buy and would help to hold management to account for its decisions to acquire those businesses. In this context, the IASB is investigating possible improvements to IFRS 3 'Business Combinations' and IAS 36 'Impairment of Assets'. The comment period on the discussion paper ends on 15 September 2020.



The IASB's project on goodwill and impairment results from the post-implementation review of IFRS 3 Business Combinations.

The feedback on the post-implementation review had revealed that impairment of goodwill is not always recognised in a timely fashion and that disclosures required by IFRSs do not provide enough information to understand whether the acquired business is performing as was expected at the time of the acquisition. There were also comments that the impairment test required for goodwill under IAS 36 Impairment of Assets is costly and complex. Some respondents also suggested reintroducing amortisation of good will.

In February 2015, to address the concerns mentioned and investigate possible improvements to IFRS 3 Business Combinations and IAS 36, the IASB added to its research agenda the following areas of focus, which later evolved into the goodwill and impairment project:

  • improving the impairment test in IAS 36;
  • subsequent accounting for goodwill (including the relative merits of an impairment-only approach and an amortisation and impairment approach); and
  • identification and measurement of intangible assets acquired in a business combination.

The discussions leading to the discussion paper published today were taken up in September 2015.


Summary of preliminary views

The discussion paper DP/2020/1 Business Combinations — Disclosures, Goodwill and Impairment presents preliminary views on the following topics:

Improving disclosures about acquisitions. The IASB believes that companies should be required to disclose the strategic rationale for an acquisition, the objectives for the acquisition, and the metrics for monitoring achievement of objectives. This should be disclosed at the acquisition date. After the acquisition date the performance against the objectives should be disclosed. Companies would disclose information management uses internally to monitor acquisitions, therefore, they would not need to create information solely for external reporting purposes. Disclosure would be required for as long as the performance is monitored by management. If the company ceases to monitor the performance or if the metrics for monitoring the performance are changed, the reason for doing so would be disclosed. The Board also believes that it should develop additional proposals that would require companies to disclose the amount, or range, of synergies expected from the acquisition, to disclose the amount of defined benefit pension liabilities and debt of the acquiree, and to disclose both actual and pro-forma revenue, operating profit and cash flows from operating activities.

Improving accounting for goodwill — Can the impairment test be made more effective? The Board believes that significantly improving the effectiveness of the test at a reasonable cost is not feasible. It also points out that shielding cannot be eliminated because goodwill has to be tested for impairment with other assets. The discussion paper also notes that an impairments test cannot always signal how an acquisition is performing, but that does not mean that the test has failed. When performed well, the test can be expected to achieve its objective of ensuring that the carrying amount of the cash-generating unit as a whole is not higher than its combined recoverable amount. The disclosure ideas discussed above could help provide investors with the information about the performance of acquisition they need. Finally, the discussion paper notes that if estimates of cash flows are too optimistic, this is best addressed by auditors and regulators, not by changing IFRSs.

Improving accounting for goodwill — Should amortisation of goodwill be reintroduced? Having concluded that the impairment test cannot be significantly improved at a reasonable cost, the Board considered whether to reintroduce amortisation of goodwill (an impairment test would still be required). The discussion paper notes that Board members have different views on this topic, but by (narrow) majority came to the preliminary view that the Board should retain the impairment only approach because there is no compelling evidence that amortisation would significantly improve financial reporting. The impairment test is believed to provide more useful information than an arbitrary amortisation charge and is more effective at holding management to account for acquisition decisions. The Board believes that it would not be appropriate to reintroduce amortisation solely because of concerns that the impairment test is not being applied rigorously or simply to reduce goodwill carrying amounts. In this context, the Board also came to the preliminary conclusion that it should develop a proposal to require companies to present on their balance sheets total equity before goodwill.

Improving accounting for goodwill — Simplifying the impairment test. The Board is of the preliminary view that it should provide relief from the mandatory annual quantitative impairment test. A quantitative impairment test would be required only if there is an indication of impairment. The Board believes that the reduction in robustness of the test would be marginal because it is unlikely that material impairment losses occur with no indicator. Similarly, the Board is of the opinion that the benefit of performing the test when there is no indicator is marginal. The Board also intends to improve the calculation of value in use. This would be achieved by removing the restriction in IAS 36 that prohibits companies from including uncommitted restructuring and asset enhancement cash flows and by allowing companies to use post-tax inputs and post-tax discount rates in calculating value in use.

Other topics. The discussion paper also sets out the Board's preliminary view that it should continue to require identifiable intangible assets to be recognised separately from goodwill. The Board believes that there is no compelling evidence that the requirements in IAS 38 should be amended. Considering whether to align the accounting treatments for acquired and internally generated intangible assets would be beyond the scope of the project.

Comments on the discussion paper are requested by 15 September 2020.


Additional information


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SME Implementation Group publishes Q&A

19 Mar 2020

The SME Implementation Group (SMEIG) has published a question and answer (Q&A) on the IFRS for SMEs.

The Q&A addresses the application of the undue cost or effort exemption for investment property on the date of transition to the IFRS for SMEs. The Q&A concludes that additional cost or effort due to the elapse of time between the date of transition and the date of preparing the first IFRS for SMEs financial statements is not considered.

Please click to access the Q&A through the press release on the IASB website.

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IASB votes on IFRS 17 effective date

17 Mar 2020

At its meeting held today, the IASB discussed and voted on the remaining issues resulting from the feedback received on the exposure draft ED/2019/4 'Amendments to IFRS 17' which were the effective date of IFRS 17 and the expiry date of the IFRS 9 temporary exemption in IFRS 4.

On the effective date, which originally was set at 1 January 2021 and which ED/2019/4 proposed to move to 1 January 2022, the Board now decided to:

  • a) defer the effective date of IFRS 17 (incorporating the amendments) to annual reporting periods beginning on or after 1 January 2023; and
  • b) extend the fixed expiry date of the temporary exemption from applying IFRS 9 in IFRS 4 to annual reporting periods beginning on or after 1 January 2023.

Although, several Board members expressed doubt or concerns, the final vote on a) was 12 in favour, 1 against, 1 absent (the one absent Board member had lost connection but later stated that he would also have voted in favour). On question b) the final vote was 12 in favour, 2 against.

The Board then proceeded to discuss questions around the balloting process. All Board members agreed that there is no need to re-expose the amendments to IFRS 17, no Board member intends to dissent from the issuance of the final amendments, and all Board members gave permission to start the balloting process. 

The staff will therefore begin to draft the amendments to IFRS 17 and bring any sweep issues identified during the balloting of the amendments for discussion at a future meeting. The staff expect that the amendments will be issued in the second quarter of 2020, in line with the Board’s plan as stated in the exposure draft.

The IASB has published a press release announcing the deferral.

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2020 IFRS XBRL taxonomy issued

17 Mar 2020

The IFRS Foundation has issued its 2020 IFRS Taxonomy. The IFRS Taxonomy is a translation of IFRS Standards into XBRL (eXtensible Business Reporting Language).

The IFRS Taxonomy 2020 is consistent with IFRSs as issued by the IASB at 1 January 2020, including those issued but not yet effective.

The IFRS Foundation has also published IFRS Taxonomy 2019 — Update 1 Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7). The IFRS Taxonomy 2020 incorporates the changes resulting from this update.

For more information, see the press release and the IFRS Taxonomy 2020 page on the IASB's website.

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Agenda for the March 2020 CMAC meeting

17 Mar 2020

Representatives from the International Accounting Standards Board (IASB) will meet with the Capital Markets Advisory Council (CMAC) by video conference on 26 March 2020. The agenda for the meeting has been released.

The full agenda for the meeting is summarised below:

Thursday, 26 March 2020 (10:00-14:25)

  • Welcome and introduction of new members
  • Primary financial statements: Exposure Draft General Presentation and Disclosures
    • Overview of the Exposure Draft
    • Preliminary feedback from members
  • Financial instruments with characteristics of equity
    • Outreach with users of financial statements to help the Board refine and further develop the disclosure proposals explored in the 2018 Discussion Paper
  • IBOR reform and its effects on financial reporting — Phase 2
    • Outreach with users of financial statements to help the Board obtain feedback on the disclosures proposed for this phase of the project
  • Management commentary
    • CMAC members input on what users need to understand for each distinct area of content in management commentary and how they use that information
    • CMAC members input on the proposed disclosure objectives for each area of content

Agenda papers for this meeting are available on the IASB's website.

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Recent sustainability and integrated reporting developments

17 Mar 2020

A summary of recent developments at CDSB, CDSB/CDP, SASB, IRC, ICAI, Deloitte, and IAASB.

The Climate Disclosure Standards Board (CDSB) is following the review of the EU Non-Financial Reporting Directive closely and proposes eight changes to ensure that the Directive is fit for purpose to achieve Europe’s ambitious sustainable finance goals. Please click for further information on the CDSB website.

The CDSB and the Carbon Disclosure Project (CDP) have jointly released an environmental reporting handbook to help companies improve their disclosure in line with the EU Non-Financial Reporting Directive. The EU Environmental Reporting Handbook helps companies learn from their peers to better understand how to report in line with the Directive. Please click for further information on the CDSB website

The Sustainability Accounting Standards Board (SASB) has launched the SASB Implementation Primer, an online resource for companies seeking to incorporate SASB standards into their core communications with investors. Please click to access the press release and the implementation primer on the SASB website.

The Integrated Reporting Committee (IRC) of South Africa has updated its starter’s guide initially published in 2014, to provide organisations with practical suggestions on preparing an integrated report. The guide is aligned with the King IV Report on Corporate Governance for South Africa and presents updated examples five years after publication of the International <IR> Framework. Please click to access Preparing an Integrated Report – A Starter’s Guide (Updated) on the IRC website.

The Institute of Chartered Accountants of India (ICAI) has set up a Sustainability Accounting Standards Board to help companies in achieving sustainable development goals. The Board will set standards that will establish disclosure requirements in line with the sustainable development goals of the United Nations. The initial composition of the Board is available here.

Deloitte Norway studied the annual and sustainability reports of the 50 largest companies headquartered in the country, analysing their maturity in terms of integrated reporting and sustainability reporting. Greenwashing or measurable results? can be accessed here.

Deloitte UK has commented on Advancing Nature-related Financial Disclosures and use of the CDSB Framework published by the CDSB. Deloitte encourages the CDSB to work with others to push with urgency for consolidation and harmonisation of standards and frameworks, in order to have one definitive global standard on climate reporting. Please click to access the comment letter here.

The International Auditing and Assurance Standards Board (IAASB) is consulting on proposed guidance Extended External Reporting Assurance. The purpose of the guidance is to promote consistent high-quality application of ISAE 3000 so as to strengthen the influence of EER assurance engagements on the quality of EER reports, enhance user trust in the resulting assurance reports, and engender greater confidence in the credibility of, trust in and reliance upon EER reports by their intended users. Please click for more information on the IAASB website.

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AASB FAQs on the impact of the coronavirus on financial reporting

17 Mar 2020

The Australian Accounting Standards Board (AASB) together with the Australian Auditing and Assurance Standards Board (AUASB) has released 'The Impact of Coronavirus on Financial Reporting and the Auditor’s Considerations' describing the key considerations and impacts on financial reporting and auditing arising from the Coronavirus (COVID-19) pandemic.

The publication is in the form of frequently asked questions, which for preparers are:

  • How to assess whether the impacts of COVID-19 are material to the entity?
  • When to adjust the financial statements, including where events continue to develop after the reporting period ends?
  • What disclosures might be required of the entity (including any continuous disclosure obligations for listed entities)?

The publication also notes that the COVID-19 outbreak is an example of an emerging risk addressed by the AASB's 2019 bulletin Climate-related and other emerging risks disclosures: assessing financial statement materiality using AASB/IASB Practice Statement 2.

Please click to download The Impact of Coronavirus on Financial Reporting and the Auditor’s Considerations from the AASB website.

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IASB reduces the March 2020 meeting agenda

13 Mar 2020

Due to concerns with the coronavirus, the IASB has reduced the agenda for the March 2020 meeting and has made it remote access only. The reduced agenda will only include discussions on amendments to IFRS 17, rate-regulated activities, and management commentary.

Our pre-meeting summaries are available on our March meeting notes page and will be supplemented with our popular meeting notes after the meeting.

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European Lab seeks members for its second task force

13 Mar 2020

The European Financial Reporting Advisory Group (EFRAG) has published a call for candidates for members of a new project task force on reporting of non-financial risks and opportunities and linkage to the business model.

The aim of the new project of the European Corporate Reporting Lab is to identify good practices on the reporting of non-financial risks and opportunities and their linkage to the business model from a sustainability perspective and addressing what is commonly known as ESG factors. The project is expected to consider the information needs and expectations of a wide range of users and other stakeholders, the extent to which they are addressed by current reporting practices, and the challenges faced by companies in providing that information.

The deadline for applications is 10 April 2020.

Please click for more information in the press release on the EFRAG website.

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Accounting considerations related to coronavirus disease 2019

12 Mar 2020

Global responses to the coronavirus disease 2019 (COVID-19) outbreak continue to rapidly evolve. COVID-19 has already had a significant impact on global financial markets, and it may have accounting implications for many entities.

Some of the key impacts include, but are not limited to:

  • Interruptions of production.
  • Supply chain disruptions.
  • Unavailability of personnel.
  • Reductions in sales, earnings, or productivity.
  • Closure of facilities and stores.
  • Delays in planned business expansions.
  • Inability to raise financing.
  • Increased volatility in the value of financial instruments.
  • Reduced tourism, disruptions in nonessential travel and sports, cultural and other leisure activities.

In addition, entities should consider the increasingly broad effects of COVID-19 as a result of its negative impact on the global economy and major financial markets.

Entities must carefully consider their unique circumstances and risk exposures when analysing how recent events may affect their financial reporting. Specifically, financial reporting and related financial statement disclosures need to convey all material effects of COVID-19.

Read more in Deloitte's IFRS in Focus newsletter.

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