EFRAG’s Discussion Paper Goodwill Impairment: 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.
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 responding 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 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."
The deadline for comments is 31 December 2017.
Full press release
Full discussion paper
© EFRAG - European Financial Reporting Advisory Group
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