Progress report on Goodwill and Impairment project

At the start of September 2019, the IASB published a progress report on its Goodwill and Impairment project on its website. This project was launched following the Post-implementation Review of IFRS 3 – Business Combinations. Readers will remember that the aim of the project is to investigate how companies could provide better information on business combinations, at a reasonable cost.

Keywords: Mazars, Thailand, IFRS, IFRS 3, IASB

19 November 2019

Specifically, the project aims to address the following criticisms that stakeholders have made of the current requirements:

  • information on the subsequent performance of acquired businesses is inadequate;
  • impairment losses of goodwill are often not recognised on a timely basis;
  • impairment testing is expensive and complex to carry out;
  • amortisation of goodwill should be reintroduced; and
  • separate recognition of some intangible assets can be difficult, and the values assigned to these intangible assets are too subjective.

The recently published article summarises the Board’s preliminary observations and recommendations, which are as follows:

  • disclosure objectives need to be improved;
  • it is not possible to develop a more effective impairment test;
  • reintroducing amortisation of goodwill would not result in better information;
  • the cost and complexity of impairment testing needs to be reduced, by providing relief from the annual impairment test and simplifying some of the requirements for estimating the value in use;
  • companies should not be permitted to include more intangible assets in goodwill; and
  • transparency should be improved by requiring companies to present total equity before goodwill.

For more information, please visit the IFRS's website.