ED on Business Combinations: Disclosure, Goodwill and Impairment

ED on Business Combinations: Disclosure, Goodwill and Impairment

• 25 March 2024
• Financial Reporting
• South African Accounting Academy

The IASB is proposing amendments to IFRS 3 Business Combinations, in accordance with their intention indicated at their meeting in Dec 2023.

The proposed amendments would require companies to report the objectives and related performance targets of their most important acquisitions, including whether these are met in subsequent years. Companies would also be required to provide information about the expected synergies for all material acquisitions. However, companies would not be required to disclose information that could compromise their acquisition objectives.

The IASB also proposes related amendments to IAS 36 Impairment of Assets to make targeted improvements to the impairment test.

In March 2024 the International Accounting Standards Board (IASB) published for public comment the Exposure Draft Business Combinations—Disclosures, Goodwill and Impairment. The Exposure Draft contains proposed amendments to IFRS 3 Business Combinations and IAS 36 Impairment of Assets.

IFRS 3 contains requirements for how an entity accounts for business combinations. The IASB did a post-implementation review of IFRS 3 to assess whether the effects of applying IFRS 3 were as intended. The IASB started the Business Combinations—Disclosures, Goodwill and Impairment project to respond to some areas of focus identified in the post-implementation review.

The proposals to amend IFRS 3 are intended, in particular, to improve the information companies disclose about the performance of business combinations.

The proposed amendments to IAS 36 are intended to improve the application of the impairment test of cash-generating units containing goodwill.

The deadline for submitting comment letters is 15 July 2024.

The Basis for Conclusions can be downloaded at https://www.ifrs.org/content/dam/ifrs/project/goodwill-and-impairment/exposure-draft-2024/iasb-bc-2024-1-bcdgi.pdf

Click here to download the Exposure Draft:

https://www.ifrs.org/content/dam/ifrs/project/goodwill-and-impairment/exposure-draft-2024/iasb-ed-2024-1-bcdgi.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• As an auditor and independent reviewer, you need to consider your clients’ compliance with accounting standards.
• As an accountant and compiler of financial statements, you need to consider amendments and proposed amendments to standards that are issued by the standard-setting bodies, e.g. IASB, IAASB, etc.

Relevance to Your clients:

• An entity compiling filing financials need to consider amendments and proposed amendments to standards that are issued by the standard-setting bodies, e.g. IASB, IAASB, etc.

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