Business Combinations—Disclosures, Goodwill and Impairment

Timeline 

The IASB issued an Exposure Draft: IASB/ED/2024/1 Business Combinations—Disclosures, Goodwill and Impairment on 14 March 2024.

The Exposure Draft (ED) contains proposed amendments to:

• IFRS 3 Business Combinations—in particular, to improve the information companies disclose about the performance of business combinations; and
• IAS 36 Impairment of Assets—in particular, amendments to the impairment test of cash-generating units containing goodwill.

The ED is open for consultation for 120 days ending 15 July 2024.

Background

In this project, the IASB is exploring whether companies can, at a reasonable cost, provide investors with more useful information about the business combinations those companies make.

The IASB’s proposals build on its preliminary views expressed in the Discussion Paper (DP) Business Combinations – Disclosures, Goodwill and Impairment published in March 2020 following the IASB’s post-implementation review of IFRS 3 Business Combinations. Details of the UKEB’s response to the DP can be found on our project webpage here. Having redeliberated its preliminary views, the IASB decided in December 2022 to add this project to its standard-setting programme.

Key IASB Proposals

The ED’s proposals include:

1. New disclosure objectives and additional disclosures requirements for some business combinations (in IFRS 3 Business Combinations)

• Quantitative information about expected synergies for all material business combinations;
• Management’s key objectives and targets, and subsequent performance against those acquisition-date metrics, for a subset of ‘strategic’ business combinations;
• Exemption from disclosing some of the information in specific circumstances;
• Identifying information using an entity’s key management personnel (KMP);
• Other amendments to existing disclosure requirements.

2. Accounting for goodwill (in IAS 36 Impairment of Assets):

• Retain the impairment-only model (no amortisation);
• Retain requirement to perform impairment test annually for cash-generating units (CGUs) containing goodwill;
• Simplifications to the calculation of value in use;
• Clarifications on how an entity allocates goodwill to CGUs;
• Other disclosure requirements.

The proposed changes to IAS 36 would affect any entity that has cash-generating units containing goodwill.

Next steps

The IASB will consider comment letters and other feedback on the proposals in the ED and will then decide whether to issue the proposed amendments.

Planned Outreach

Outreach activity on this project will include a roundtable with users, one-to-one interviews with UK preparers as well as consulting with our UKEB Advisory Groups on the proposals in the ED and our draft comment letter.

If you would like to contribute to outreach work on this project, please email ukendorsementboard@endorsement-board.uk.

For further updates on UKEB projects, you can subscribe to our newsletters and alerts by emailing contact@endorsement-board.uk and putting SUBSCRIBE in the subject.

UKEB Meetings

• October 2023 IASB General Update paper – Appendix B includes a summary of the IASB’s tentative decisions on this project. 
• April 2024 Exposure Draft – Initial Technical Paper