IASB has announced the completion of its Post-implementation Review of IFRS 3 Business Combinations. It shows general support for the accounting requirements in the Standard but identifies some areas where further research will be undertaken, including accounting for goodwill.
The scope of this review covered the whole Business Combinations project, including resulting consequential amendments to other Standards, such as IAS 36 Impairment of Assets.
The review of academic literature provides evidence that generally supports the business combinations accounting requirements of IFRS 3 and related Standards, particularly in relation to the usefulness of reported goodwill, other intangible assets and goodwill impairment. However, investors expressed mixed views on aspects of the current accounting for goodwill, with some preferring a return to periodic amortisation of goodwill.
Many preparers, auditors and regulators identified implementation challenges in the requirements, in particular applying the definition of a business, measuring the fair value of contingent consideration, contingent liabilities and intangible assets, and testing goodwill for impairment on an annual basis.
IASB has added two projects to its research agenda to explore further the key findings. These projects will focus on the following issues:
See further information in the RFI below.
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