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 with a comment deadline of 15 July 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.

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 received during the consultation period and other feedback on the proposals in the ED and will then decide whether to issue the proposed amendments.

UKEB Outreach

Outreach activity on this project included a roundtable with users and preparers, one-to-one interviews with preparers and consulting with our UKEB Advisory Groups. In addition, our draft comment letter was open for public consultation between 31 May 2024 and 1 July 2024. The draft comment letter and all four written responses received to the draft comment letter are attached below. Thank you to all UK stakeholders who participated in this project. 

UKEB Final Comment Letter

The UKEB Final Comment Letter was submitted to the IASB on 19 July 2024 and is published on this webpage (see below).

The UKEB is broadly supportive of the package of proposed amendments to the disclosure requirements in IFRS 3 Business Combinations and the impairment test in IAS 36 Impairment of Assets. The proposed amendments would provide investors with better information about the post-acquisition performance of acquired entities.

The Comment Letter sets out our observations and recommendations, reflecting our UKEB outreach and desk-based research.

UKEB Meetings

• October 2022 IASB General update paper (p10-12) Update on the IASB’s redeliberation
• December 2022 IASB General update paper (p20-21) For noting - Update on the IASB’s redeliberation
• January 2023 IASB General update paper (p34-35) For noting - Update on the IASB’s redeliberation
• February 2023 IASB General update paper (p36-38) For noting - Update on the IASB’s redeliberation
• March 2023 IASB General update paper (p27-32) For discussion - Update on the IASB’s redeliberation
• April 2023 IASB General update paper - Appendix 8E For noting - Update on the IASB’s redeliberation
• June 2023 IASB General update paper – Appendix D For noting - Update on the IASB’s redeliberation
• October 2023 IASB General update paper – Appendix B includes a summary of the IASB’s tentative decisions on this project. 
• March 2024 Project Initiation Plan (see document below)
• April 2024 Exposure Draft – Initial Technical Paper
• May 2024 Draft Comment Letter (see version published for public consultation below)
• July 2024 Final Comment Letter (see version submitted to the IASB below) and Feedback Statement (see below)

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.