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IFRS® Accounting Standards

What You Need to Know about IASB’s Exposure Draft “Business Combinations – Disclosure, Goodwill and Impairment”

April 15, 2024 International Activity, News, Resource, Guidance

AcSB Exposure Draft – Business Combinations – Disclosures, Goodwill and Impairment 

What you need to know 

The Accounting Standards Board (AcSB) is participating in the International Accounting Standards Board’s (IASB) project to enhance IFRS 3 Business Combinations and IAS 36 Impairment of Assets. The proposed amendments aim to improve financial reporting, particularly for business combinations, with a significant focus on disclosure enhancements and simplifying impairment tests.

The proposed amendments will also affect how entities perform goodwill impairment assessments, directing entities to do so at the lowest level monitored by management for the related business. This should prevent the automatic assignment of goodwill to operating segments and may result in allocating goodwill to more cash generating units (CGUs). This may lead to increased effort if additional impairment assessments are needed for multiple CGUs that have been allocated goodwill.

Objective and background

This project was started to address feedback received as part of the Post implementation Review of IFRS 3. The review indicated that:

  • investors and users need better information to help them assess the performance of business combinations; and
  • the impairment test is viewed as complex and did not result in the timely recognition of impairment charges.

The objective of the IASB’s proposals is to:

  • increase the qualitative information provided about business combinations;
  • simplify and reduce the costs associated with performing the quantitative impairment test; and
  • improve the effectiveness of the impairment test.

More details about the proposals

Exposure Draft’s Key Proposals

Disclosures about business combinations

  • Disclose performance information about strategic business combinations in current and subsequent years.
  • Identify performance information based on information reviewed by the entity’s key management personnel.
  • In subsequent years, disclose management’s review of the entity’s performance against those objectives and targets.
  • Enhance existing qualitative and quantitative disclosures, including information about expected synergies.
  • Provide limited exemptions to an entity fromdisclosing some information in specific circumstances.

Accounting for goodwill

  • Retain the impairment-only model (no amortization).
  • Simplify the value-in-use calculation by allowing entities to:
    • use post-tax discount rates and cash flows; and
    • consider restructuring and improvements in cash flow estimates.
  • Retain the requirement to perform the impairment test annually.
  • Change how an entity allocates goodwill to CGUs.
  • Enhance the disclosures provided including:
    • the CGU, or group of CGUs, to which goodwill is allocated; and
    • the reportable segments in which those CGUs are included.

The IASB’s Exposure Draft, “Business Combinations–Disclosures, Goodwill and Impairment,” includes a Basis for Conclusions and amendments to the Illustrative Examples accompanying IFRS 3 and IAS 36.

What’s the AcSB’s role in this project?

The AcSB’s due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IASB and issuing the AcSB’s own exposure draft on each IASB proposal.
Stay tuned for opportunities to participate in consultation activities to inform the AcSB’s response to the IASB.

Subject to the responses to the AcSB’s Exposure Draft on whether the IASB’s proposals are appropriate for application in Canada, the AcSB expects that the amendments will be incorporated into Canadian generally accepted accounting practices in accordance with the AcSB’s strategy of adopting IFRS® Accounting Standards for publicly accountable enterprises.

Stay up to date

  • Register for the virtual roundtable.
  • Register for updates on this project online.
  • Stay tuned for the further project updates via the AcSB’s and IASB’s websites.

Staff Contact(s)

Jayshal Rajendra Daya, CPA, CA Principal, Accounting Standards Board

Prajesh Marwaha, CPA Principal, Accounting Standards