Goodwill and Impairment project: disclosures on strategically important business combinations

Keywords: Mazars, Thailand, Goodwill, Impairment, IASB, IAS24, IFRS 8, IAS 36

12 April 2023

Readers will remember that the DP proposed the following disclosure requirements, using information used
by management (a “management approach”):

• the objectives for the acquisition;
• the metrics and targets used to monitor whether the acquisition is meeting these objectives;
• for subsequent periods, the extent to which management’s objectives are being met, using these metrics.

At its February meeting, the IASB reached the following tentative decisions:

• regarding the level of management used to identify the information required: this should be the “key management personnel” of the entity, as defined in IAS 24 (in the Discussion Paper, the IASB had proposed that this should be the “chief operating decision maker” as defined in IFRS 8);
  • regarding the subsequent performance of the business combination:
  • information will be required for as long as the management continues to monitor whether it is meeting the objectives and targets set when the business combination was entered into;
  • if performance is not monitored, or if the management ceases to monitor performance before the end of the second full year following the business combination, the entity must disclose this and explain why;
  • furthermore, if the management ceases to monitor performance before the end of the second full year following the business combination, the entity must disclose information about actual performance using the metric set out in the year of acquisition, if this information is received by the management (e.g. when it is reviewing the entity’s annual budget).

The IASB also tentatively decided to specify the level of detail required for some of these disclosures:

• disclosures about the targets for a business combination may be provided either as a point estimate or a range of values;
• an entity is only required to provide disclosures about its “key” objectives, i.e. those critical to the success of the business combination.

Over the coming months, the Board is expected to reach further tentative decisions regarding disclosures on business combinations and impairment testing under IAS 36. For an overview of the earlier stages of this project, see the In Brief article by Board member Rika Suzuki, published on the IASB’s website on 31 January.