Under IFRS, goodwill arising from a business combination is not amortised but subject to an annual impairment test. There has been a long debate on the strengths and weaknesses of an impairment-only model. In view of the increased attention from constituents, and the on going post-implementation review of IFRS 3 Business Combinations, the ASBJ, EFRAG and OIC formed a Research Group to study issues relating to the accounting and disclosure requirements for acquired goodwill set forth in IFRS 3 and IAS 36 Impairment of Assets and developed a Discussion Paper (‘DP’) to seek public comments. Based on the work to date, the ASBJ, EFRAG and OIC reached the view that the DP would stimulate useful debate. The views presented in the DP are those of the Research Group only.
In this DP, the Research Group explores possible approaches to remedy the shortcomings that constituents identified by considering one or a combination of the following: (a) changing the accounting requirements for goodwill, (b) improving the requirements for impairment testing and (c) improving the disclosure requirements in IAS 36. As a result of its analysis, the Research Group concluded that reintroduction of amortisation of goodwill would be appropriate.