Accounting Standards for Private Sector Not-for-Profit Organizations

Subsequent Measurement of Goodwill and Acquired Intangible Assets

Summary

The Accounting Standards Board (AcSB) was made aware of challenges faced by private enterprises with respect to the recognition of intangible assets and subsequent measurement of goodwill. More specifically, preparers have mentioned the cost and complexity of:

estimating the fair value of certain intangible assets acquired in a business combination; and
carrying out the goodwill impairment tests.

In addition, the Board has heard feedback that goodwill and quantitative information about some intangible assets may not be decision-useful for financial statement users of private enterprises and not-for-profit organizations.

We have decided to undertake a project to better understand how the following considerations affect private enterprises and not-for-profit organizations:

the current challenges with the recognition of intangible assets acquired in a business combination and the subsequent measurement of goodwill
the information needs of financial statement users

As part of this project, we will also explore whether to propose relief from the recognition of intangible assets acquired in a business combination and whether we should propose a change to allow entities to amortize goodwill.

Staff Contact(s)

Dominique Hamel, MSc, CPA Principal, Accounting Standards

+1 514 285 5019

[email protected]

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

+1 416 204 3501

[email protected]

Project Status

Information gathering

The AcSB undertook research to better understand the current challenges with the recognition of intangible assets acquired in a business combination and the subsequent measurement of goodwill
Approving project

In March 2024, the AcSB approved a project to develop an exposure draft
Consulting stakeholders

The AcSB is conducting public outreach to inform exposure draft proposals
Deliberating feedback
Final pronouncement

Virtual roundtable discussion – Exploring the AcSB’s project, “Subsequent Measurement of Goodwill and Acquired Intangible Assets."

Join the AcSB for a virtual roundtable discussion to share your feedback with the AcSB to inform future exposure draft proposals on providing relief from recognizing intangible assets acquired in business combinations and allowing entities to amortize goodwill. Register now to save your spot! 

Webinar – Domestic Accounting Standards Update (Spring 2024)

Register for this webinar to learn about current accounting standards projects and recent amendments in Parts II, III and IV of the CPA Canada Handbook – Accounting. Join us for the English webinar on May 15, 2024, or the French webinar on May 16, 2024.

English

Meeting & event summaries

April 2, 2024

AcSB Decision Summary – March 5-6, 2024

The AcSB discussed and approved a project proposal for a standard-setting project allowing private enterprises and, to the degree impacted, not-for-profit organizations to amortize goodwill and to provide relief from recognizing certain or all intangible assets acquired in a business combination. To streamline the process, the Board opted for extensive preliminary outreach, including public engagement, rather than issuing a consultation paper. This approach aims to expedite financial reporting relief and ensure well-informed proposals for inclusion in an exposure draft.

The AcSB plans to complete preliminary outreach activities with interested and affected parties in May and June 2024. Opportunities to participate in outreach activities will posted on the Subsequent Measurement of Goodwill and Acquired Intangible Assets project page. Feedback from preliminary outreach will be discussed at the Board’s July 2024 meeting, leading to decisions on proposals for inclusion in an exposure draft.

February 9, 2024

AcSB Decision Summary – January 23, 2024

The AcSB discussed research findings and feedback from its Not-for-Profit Advisory Committee, Private Enterprise Advisory Committee and Small Practitioners Working Group on the challenges related to the subsequent measurement of goodwill and the recognition of intangible assets acquired in a business combination. The Board also discussed a potential standard-setting project that would allow private enterprises to amortize goodwill and offer relief from the recognition of intangible assets acquired in a business combination.

The AcSB agreed that the project should address both the subsequent measurement of goodwill and the relief from recognition of acquired intangible assets. The Board also determined that this project should consider the implications for entities applying both Parts II and III of the CPA Canada Handbook – Accounting. The Board highlighted the need to conduct more public outreach before issuing an exposure draft.

The AcSB will discuss a project proposal at its March 2024 meeting.

January 18, 2024

Not-for-Profit Advisory Committee Meeting Notes – December 14, 2023

The Not-for-Profit Advisory Committee discussed challenges related to the recognition of intangible assets acquired in combinations and the subsequent measurement of goodwill. The Committee also explored the idea of providing relief to private enterprises and NFPOs from the recognition of intangible assets acquired in combinations and to allow them to amortize goodwill.

Committee members expressed that, overall, combinations are rare for NFPOs. When an NFPO acquires another NFPO, it is typically accounted for as a merger. There are a growing number of transactions where NFPOs acquire for-profit organizations, leading to a combination and the recognition of intangible assets and goodwill, but this situation remains rare. As a result, goodwill and acquisition-related intangible assets are rarely separately recognized on NFPOs’ balance sheets.

Since it is rarely seen in practice, Committee members did not highlight the need to provide additional relief from the recognition of intangible assets for NFPOs. However, the Committee did not object to providing such relief. Similarly, while goodwill is not prevalent in the not-for-profit sector, the Committee supported the idea of reintroducing the amortization of goodwill for private enterprises and NFPOs.

In January 2024, the AcSB will discuss its ongoing research. The Board will consider input from the Not-for-Profit Advisory Committee, the Small Practitioners Working Group, and the Private Enterprise Advisory Committee in deciding whether to move forward with the project.

Disclaimer

This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal voting process.