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Business Combinations—Disclosures, Goodwill and Impairment

Business Combinations—Disclosures, Goodwill and Impairment Questionnaire: Preparers of financial statements


In March 2020 the IASB issued a Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment (‘the DP’). Acquisitions, which IFRS Standards call business combinations, are often large transactions. Users are highly interested in information about such transactions. The aim is exploring how to help prepares hold companies to account for acquisitions, to inform users about success of such acquisitions and improve the accounting for goodwill. According to the discussion paper a company should be required to disclose information about its objectives for an acquisition and, in later periods, information about how that acquisition is performing against those objectives. Such information would help investors to hold that company’s management to account for its acquisition decisions.
On 9 May 2020, EFRAG has published its draft comment letter in response to the IASB's DP and seeks constituents' views on the proposals.
In relation to goodwill impairment testing the IASB's DP states that it is not possible to make the impairment test for cash-generating units containing goodwill significantly more effective. To address shielding to a certain extent, EFRAG suggests in its draft comment letter that the guidance on goodwill allocation to cash generating units is considered by the IASB and possibly amended to improve how the test is applied in practice. In addition, better disclosures of estimates used to measure recoverable amounts of cash-generating units containing goodwill could be considered. The DP suggests that amortisation of goodwill should not be reintroduced. At this stage, EFRAG has not formed a view on this issue and is seeking inputs from its constituents on new evidences, new arguments or new assessment on the existing evidences to support a change. Comments on the draft comment letter (DCL) are requested by 30 November 2020.
During the consultation period, EFRAG is launching this questionnaire for preparers assessing the impact of the DP’s proposals and the findings will be reflected in EFRAG’s final comment letter.
This analysis is intended to help EFRAG and its constituents understand the potential impact, expected benefits and costs of the possible approaches on how to account for goodwill subsequent to the initial recognition (e.g. impact of better disclosures, amortisation of goodwill, indicator only-approach, improved value in use calculation etc).
This survey, which is targeted at preparers, is part of an impact assessment exercise. The related questionnaire includes ten background questions and forty-one questions on the potential impact including the expected costs and benefits of changes if the IASB DP proposals were to be adopted.
The survey should take approximately thirty minutes to complete and can be completed with breaks. 

Background information

Please provide the following information about your background and your company:

(a) What is your primary sector/industry category?

  *This question is required.
(b) Does your organisation have significant operations in the European Economic Area (EU, Norway, Liechtenstein and Iceland)?

(c) In what region(s) does your organisation have significant operations (select all that apply)?

(d) Please specify whether your financial reporting is in accordance with IFRS.

 (e) What is an indicative level of your organisation’s total assets on the consolidated statement of financial position (e.g. as at 2019 year-end)?

(f) Within your capital structure, what is the current proportion of goodwill, relative to total assets? Please provide either the specific or approximate proportion (in percentage terms) as at 2019 year-end. 

(g) Within your capital structure, what is the current proportion of goodwill, relative to total equity? Please provide either the specific or approximate proportion (in percentage terms) as at 2019 year-end. 

(h) Does your organisation regularly (at least one in two years) enter into business combinations?

(i)  At which level goodwill is normally allocated by your organisation?
(j)  May we contact you if we have questions about your response?