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14/03/2018 - Feedback statement on EFRAG's goodwill impairment paper

​In June 2017 EFRAG issued the Discussion Paper Goodwill impairment test: can it be improved? which included suggestions to improve the goodwill impairment test. EFRAG is now issuing a feedback statement which summarises the response received from constituents. The feedback will be used by EFRAG in developing its response to any future IASB proposals arising from its Goodwill and Impairment research project.

​Goodwill impairment test: can it be improved?

And the answer is yes. EFRAG received twenty-two comment letters, which are available on EFRAG's​ website, in which many constituents expressed the view that goodwill impairment test can be improved in certain areas. However, many constituents called for a rigorous cost-benefit analysis on any future changes.

More generally, many constituents appreciated EFRAG's efforts to stimulate the debate on potential improvements to the goodwill impairment test. In particular, some respondents welcomed EFRAG's initiative to engage with European constituents during the early phases of the IASB's research work.

With regard to EFRAG's specific suggestions, respondents generally agreed with the inclusion of future restructurings in the calculation of value in use and allowing the use of a post-tax discount rate. They explained that both suggestions would reduce complexity and application costs of current requirements.

There was also some support for the introduction of a qualitative assessment on the likelihood of an impairment (a so-called 'Step Zero'). However, some respondents were concerned that this could affect the timeliness of goodwill impairments.

Finally, there was less support for the remaining suggestions such as providing additional guidance on the allocation of goodwill to a cash-generating unit, eliminating one of the two possible methods for determining the recoverable amount or introducing the accretion approach to target internally generated goodwill. Respondents considered that these ideas may increase complexity and costs to some extent, without clearly enhancing the effectiveness of the impairment test.