EFRAG’s Final Comment Letter on the IASB's ED Business Combinations—Disclosures, Goodwill and Impairment

EFRAG has published its Final Comment Letter on the IASB’s ED/2024/1 Business Combinations—Disclosures, Goodwill and Impairment (Proposed amendments to IFRS 3, IAS 36) (‘the ED’).

​EFRAG supports the IASB's objective to improve the information entities provide to investors, at a reasonable cost, about acquisitions made. 

However, EFRAG notes key reservations on some of the proposed amendments to IFRS 3 Business Combinations. EFRAG is not convinced that the IASB’s proposed amendments on IAS 36 Impairment of Assets will change existing practice, and thus may fail to meet the IASB’s objective.
In relation to the proposed amendments to IFRS 3, EFRAG provides some suggestions for the IASB to consider:

  • Disclose the performance information and quantitative information on expected synergies in the management report, rather than in the financial statements. EFRAG strongly encourages the IASB to conduct field-testing on the proposed disclosures.
  • Allow entities to rebut the presumption that an acquisition is 'strategic', when meeting any of the thresholds, if the management can demonstrate that the acquisition t does not meet the management's overall view of a strategic business combination and remove the 'operating profit or loss' from the proposed thresholds.
  • Include illustrative examples of 'specific circumstances' in which the exemption would apply and do not require an entity to disclose the reasons why it has not disclosed an item of information.
  • Further explore whether it is necessary to define a level of management that reviews and monitors the proposed information.

Regarding the amendments to IAS 36, EFRAG suggests that the IASB:

  • Modify the amended guidance on how to allocate goodwill and includes a requirement for explaining changes in the carrying amount of goodwill allocated to CGUs or groups of CGUs.
  • Provide guidance on what should be included in uncommitted future restructuring or asset performance enhancement.
  • Clarify whether using pre-tax cash flows and pre-tax discount rates or post-tax cash flows and post-tax discount rates should produce the same recoverable amount.

More details on EFRAG's recommendations to the IASB can be found in EFRAG's Final Comment Letter here.

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