Business Combinations—Disclosures, Goodwill and Impairment

About this consultation

Acquisitions are often significant transactions. The Exposure Draft aims to address investors’ calls for better information in the financial statements about acquisitions – as well as concerns about the effectiveness and complexity of the impairment requirements for goodwill arising from acquisitions.

The IASB proposes to amend IFRS 3 Business Combinations and IAS 36 Impairment of Assets. The Exposure Draft includes proposals in the following key areas:

1. Enhanced qualitative and quantitative disclosure requirements for strategic acquisitions (IFRS 3):

• Amendments to disclosure requirements for material acquisitions during the period, e.g. new requirement to quantify the expected synergies from material acquisitions – as well as additional disclosures on objectives and performance for acquisitions that are also considered strategic.
• These proposals aim to give investors a more comprehensive understanding of the rationale behind acquisitions, the expected synergies, and their subsequent performance, using the same information management uses to assess and monitor acquisitions.

2. Targeted amendments to the goodwill impairment requirements (IAS 36 ):

• Aim to improve the timely recognition of impairment losses on goodwill of poorly performing acquisitions, by providing further clarity on the allocation of goodwill to cash-generating-units (CGU), and by requiring further disclosure of which reportable segment a CGU that contains goodwill is included in.
• Reduce the complexity of impairment testing by removing the restriction on including cashflows from uncommitted future restructures or asset enhancements, and by removing the requirement to calculate value in use on a pre-tax basis.

Consultation is now closed

Submissions to the XRB closed on 14 June 2024.

Submissions to the IASB closed on 15 July 2024.