Business Combinations - Disclosures, Goodwill and Impairment
- Active
- Exposure draft consultation
- Isabel Batista
Description
Project History
The 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.
- improvements to the disclosure requirements relating to business combinations; and
- changes to the impairment test of cash-generating units containing goodwill in IAS 36.
In May 2024 the IASB published the Exposure Draft Business Combinations - Disclosures, Goodwill and Impairment ('the ED') which sets out a package of proposals that in the IASB’s view would result in companies providing better information - at a reasonable cost - about acquisitions, thereby responding to stakeholder concerns.
The IASB is currently considering the feedback it received in response to the Exposure Draft.
IASB Discussion Paper and EFRAG's response
In response to the IASB's DP that was published in March 2020, EFRAG published its draft comment letter in May 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 impairment test and the costs and consequences of reintroducing goodwill amortisation.
IASB Exposure Draft and EFRAG's response
In March 2024 the IASB published Exposure Draft Business Combinations - Disclosures, Goodwill and Impairment, proposing 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.
In response to the IASB's ED, EFRAG, on 30 April 2024, published its draft comment letter, where it welcomed the IASB's efforts to improve the disclosure requirements in IFRS 3 and goodwill impairment test in IAS 36 at a reasonable cost to preparers. However, noting that there are still significant concerns, EFRAG asked for additional input from constituents on:
- specific aspects of the package of new disclosures, including application of the exemption, and proposed threshold approach to identify a strategic business combination;
- the proposal to provide quantitative information on expected synergies; and
- whether, in addition to the proposal to remove the requirement to use pre-tax cash flows and pre-tax discount rates in calculating value in use, the IASB should deal with existing tax issues, including the treatment of deferred taxes.
After considering feedback received, EFRAG on 22 July 2024, published its final comment letter where EFRAG supports the IASB's objective to improve the information entities provide to investors, at a reasonable cost, about acquisitions made. However, EFRAG noted key reservations on some of the proposed amendments to IFRS 3 and is not convinced that the proposed amendments on IAS 36 will change existing practice, and thus may fail to meet the IASB’s objective. EFRAG, hence, provided a number of suggestions on amendments to IFRS 3 and IAS 36. |
Documents
Project news
-
16/10/2024 - EFRAG publishes Feedback Statement on the IASB’s Exposure Draft Business Combinations—Disclosures, Goodwill and Impairment
EFRAG publishes its Feedback Statement on the IASB’s ED/2024/1 Business Combinations—Disclosures, Goodwill and Impairment (Proposed amendments to IFRS 3 and IAS 36) (‘the ED’).
-
22/07/2024 - 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’).
-
30/04/2024 - EFRAG’S Draft Comment Letter on the IASB's ED Business Combinations—Disclosures, Goodwill and Impairment
EFRAG has published its draft comment letter (‘the DCL’) on the IASB’s ED/2024/03 Business Combinations—Disclosures, Goodwill and Impairment (Proposed amendments to IFRS 3, IAS 36) (‘the ED’).Comments to the EFRAG DCL may be submitted until 28 June 2024. -
10/10/2023 - EFRAG’s survey - Business Combinations – Disclosures, Goodwill and Impairment: Disclosures
EFRAG is launching a survey to seek preparers’ views on the IASB’s tentative decisions on its project Business Combinations - Disclosure, Goodwill and Impairment regarding the disclosure requirements for business combinations.
You can submit your answers by using the link to the survey before 30 November 2023. You can have an overview of the survey in PDF here.
-
26/02/2021 - EFRAG's feedback statement on Business Combinations—Disclosures, Goodwill and Impairment
EFRAG has issued its feedback statement explaining how EFRAG considered the comments received in response to its draft comment letter on the IASB DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment. The feedback statement is available here.
-
29/01/2021 - EFRAG Comment Letter on Business Combinations – Disclosures, Goodwill and Impairment
EFRAG has published its final comment letter in response to the IASB's Discussion Paper DP 2020/1 Business Combinations – Disclosures, Goodwill and Impairment. In the letter, which benefits from the results of the extensive outreach conducted with European stakeholders, EFRAG supports the objective to explore whether companies can, at a reasonable cost provide investors with more useful information about acquisitions and address some practical aspects from such requirements. EFRAG notes room for improvement in goodwill accounting. Considering that an accounting policy should only be changed if it would provide reliable and more relevant information, EFRAG suggests the IASB further explore improvements to existing impairment test and any cost and consequences of reintroducing amortisation.
-
20/11/2020 - Reminder: Business Combinations - Disclosures, Goodwill and Impairment - Please provide input by 30 November 2020
EFRAG asks constituents to provide their views on the EFRAG draft comment letter in response to the IASB's Discussion Paper DP/2020/1 Business Combinations — Disclosures, Goodwill and Impairment by Monday, 30 November 2020. Please submit your comment letter here.
-
07/10/2020 - Questionnaire for preparers - How could accounting for goodwill be improved - responses welcome till 13 November 2020.
EFRAG has extended its deadline to 13 November 2020 for its questionnaire for preparers with active M&A agendas or material goodwill amounts in the financial statements. The purpose is to collect input on the proposals in the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment and on EFRAG’s suggestions included in its draft comment letter.
-
11/09/2020 - Your opinion matters – Questionnaire for preparers – How could accounting for goodwill be improved?
EFRAG launches a questionnaire/invitation for an interview for preparers with active M&A agendas or material goodwill amounts in the financial statements. The purpose is to collect input on the proposals in the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment and on EFRAG’s suggestions included in its draft comment letter.
-
29/05/2020 - EFRAG Draft Comment Letter on IASB DP 'Business Combinations — Disclosures, Goodwill and Impairment'
EFRAG has published its Draft Comment Letter in response to the IASB's Discussion Paper DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment. Comments on the draft comment letter are requested by 30 November 2020.
