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Business Combinations—Disclosures, Goodwill and Impairment

Description

Project History


T​he objective of this IASB project is to explore whether companies can, at a reasonable cost, provide investors with more useful information about the business combinations those companies make. 

In June 2015, the IASB completed the Post-implementation Review of IFRS 3 and in response to the feedback received decided to undertake improvements to the accounting and disclosures for business combinations.

In March 2020, the IASB published the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment (the “DP”). The DP examined whether:
  • companies could provide better information in the financial statements about business combinations, in particular, information on the subsequent performance of a business combination;
  • the impairment test could be made more effective at recognising impairment losses on goodwill on a timely basis and at a reasonable cost;
  • amortisation of goodwill should be reintroduced;
  • the impairment test could be amended to reduce its cost and complexity; and
  • some intangible assets should be included within goodwill.

In March 2021, the IASB started its redeliberations of the project and considering the feedback received duirng its consultation of the DP. So far, the IASB has tentativeky decided to retain the objective of the project as per the DP and also to leave the scope unchnaged at this stage.

In December 2022, the IASB added this project to its standard-setting programme, which now focuses on:
  • improvements to the disclosure requirements relating to business combinations; and
  • changes to the impairment test of cash-generating units containing goodwill in IAS 36.

IASB Discussion Paper and EFRAG's response


In response to the IASB's DP that was publichsed on 19 March 2020, EFRAG published its draft comment letter in response on 29 May 2020 and invited constituents to respond to EFRAG's preliminary views by 30 November 2020.

 

During the consultation period, EFRAG organised, co-organised and participated in various webinars to stimulate the debate and to learn constituents views on the proposals. EFRAG also consulted preparers on the proposals by means of a questionnaire, interviews and field tests. The latter was carried out in co-operation with the IASB.

 

From November 2020 to January 2021, EFRAG considered the various input received, including the results from the outreaches and other events, and submitted its final comment letter to the IASB on 28 January 2021. In the comment letter, EFRAG supported the objective of the IASB's project, noting that there is room for improvement in goodwill accounting and related disclosures. EFRAG recommended the IASB to explore improvements to the current goodwill impiarment test and the costs and consequences of reintroducing goodwill amortisation.

 

Recent developments


In September 2023, the IASB decided to publish and Exposure Draft including amendments to:

  • IFRS 3 Business Combinations - in particular to improve company disclosures on the business combinations performance; and
  • IAS 36 Impairment of Assets - in particular amendments to the impairment test of cash-generating units containing goodwill.

The Exposure Draft is expected in the first half of 2024.

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