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29/06/2017 - New EFRAG discussion paper tackles goodwill impairment testing

EFRAG’s Discussion Paper Goodwill impairment test: can it be improved? is the latest in a series of EFRAG research publications on goodwill accounting - a complex and controversial topic. This publication illustrates a number of potential amendments to the goodwill impairment test with the view to enhancing its application and effectiveness and reducing complexity.

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​Goodwill arises in a business combination and, under existing IFRS, must be tested for impairment at least annually. Further to​​​​ the IASB's Post-implementation Review of IFRS 3 Business Combinations, which noted various concerns related to the goodwill impairment testing requirements in IAS 36 Impairment of Assets, EFRAG has been conducting research work in this area.

When res​ponding to the EFRAG/ASBJ/OIC 2014 discussion paper Should Goodwill still not be amortised? many constituents considered that impairment was a challenge in practice and that there was room to improve the guidance in IAS 36. After considering the feedback received, and the findings of EFRAG's 2016 quantitative study What do we really know about goodwill and impairment? EFRAG decided to focus on potential improvements to the impairment model in IAS 36.


The scope of the publication is limited to impairment testing and it does not seek to address broader topics such as identification and measurement of acquired intangible assets in a business combination or the extent to which these should be separated from or subsumed into goodwill.

The new publication completes EFRAG's current research activities on goodwill. EFRAG will utilise the feedback received when responding to any future consultations arising from the IASB's Goodwill and Impairment research project.

According to Andrew Watchman, EFRAG TEG Chairman, "the topic of goodwill accounting has been debated for years, but sometimes the discussion needs to move forward. Three years after the start of the IFRS 3 post-implementation review, EFRAG decided it was time to engage constituents on some concrete, practical suggestions to improve the impairment test. EFRAG now needs feedback to help us influence the direction of the IASB's ongoing work and respond to any new proposals in due course. Europe needs to play a key, thought-leadership role in this important area."

EFRAG asks European constituents for their views on the advantages and disadvantages of these potential amendments. The deadline for comments is 31 December 2017.

To download the Discussion Paper click here.


1. This paper is part of EFRAG’s research work. EFRAG influences future standard-setting developments by engaging with European constituents and providing timely and effective input to early phases of the IASB’s work. Four strategic aims underpin research work: engaging with European constituents to understand their issues and how financial reporting affects them; influencing the development of International Financial Reporting Standards (IFRS Standards); providing thought leadership in developing the principles and practices that underpin financial reporting; and promoting solutions that improve the quality of information, are practical, and enhance transparency and accountability.​

2. About EFRAG ( 

EFRAG’s mission is to serve the European public interest by developing and promoting European views in the field of financial reporting and ensuring these views are properly considered in the IASB standard-setting process and in related international debates. EFRAG ultimately provides advice to the European Commission on whether newly issued or revised IFRS meet the criteria in the IAS Regulation for endorsement for use in the EU, including whether endorsement would be conducive to the European public good.

EFRAG seeks input from all stakeholders, and obtains evidence about specific European circumstances, throughout the standard-setting process and in providing our endorsement advice. Our legitimacy is built on transparency, governance, due process (which may include field tests, impact analyses and outreaches), public accountability and thought leadership. This enables EFRAG to speak convincingly, clearly and consistently, and be recognised as the European Voice in financial reporting.