IASB consults to improve acquisitions information

Feedback is sought on changes to disclosures, goodwill and impairment relating to business acquisitions.

The International Accounting Standards Board (IASB) is seeking to improve the information companies provide to investors about acquisitions the companies make. It issued on Thursday a discussion paper, Business Combinations — Disclosures, Goodwill and Impairment, with a 15 September 2020 deadline for comments.

The IASB’s move follows stakeholder concerns raised in its post-implementation review of the accounting standard for business acquisitions, IFRS 3, Business Combinations.

The IASB is consulting on three areas:

Disclosures about acquisitions

The standard-setter is suggesting changes to IFRS that would require a company to disclose information about its objectives for an acquisition and, in subsequent periods, disclose information about how the acquisition is performing against those objectives. 

IASB Chair Hans Hoogervorst said: “Investors want better information about how acquisitions are performing to help them hold a company’s management to account.” He added that the IASB’s suggested solution “aims to meet investors’ needs without being too costly for companies”.

Accounting for goodwill after an acquisition

Companies are required to test goodwill annually for impairment after an acquisition, but stakeholders have mixed views about whether this test is effective, the IASB said. It sought to identify a better impairment test — one that would require a company to report at an earlier date if its goodwill had lost value. The IASB concluded, though, there is not an alternative that can target goodwill better and at reasonable cost. The IASB is, however, seeking to simplify the impairment test “without making the test significantly less robust”. It also looked at whether amortising goodwill would significantly improve the information that companies report to investors and concluded there was no clear evidence it would.

Hoogervorst said: “[The IASB’s] current view is that we should retain the impairment-only approach and not reintroduce amortisation, but we would welcome any new evidence to inform this important debate.”

Other topics for consultation

The IASB’s preliminary view is that in acquisitions companies should present on the balance sheet the amount of total equity excluding goodwill. Also, as its preliminary view, it believes it should retain the requirements in IFRS 3 and International Accounting Standard 38, Intangible Assets, for recognising acquired intangible assets separately from goodwill.

The IFRS’s discussion paper, snapshot document, and explanatory video are available online.

Oliver Rowe ( is an FM magazine senior editor.