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IASB Discussion paper on Business Combinations—Disclosures, Goodwill and Impairment

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The implementation of high quality Indian Accounting Standards (Ind ASs) by Indian Companies is a monumental step in the accounting history of India. The Institute of Chartered Accountants of India (ICAI) believes that Ind AS Framework has enhanced the quality of financial statements of Indian entities and strengthened their competitiveness and comparability. Trinity of high quality financial reporting, sound corporate governance and robust audit mechanism is critical to the success and growth of any economy.


Ind ASs are derived from IFRS Standards issued by the International Accounting Standards Board (IASB). IFRS Standards are globally acceptable high quality financial reporting standards with a dynamic framework that undergoes reforms periodically to keep pace with the evolving business and economic environment. In order to remain converged, and to meet the pace of changing business environment,            there is a need for us to actively participate in the IASB’s standard-setting activities.


Mergers and acquisitions—referred to as ‘business combinations’ in IFRS Standards— are often large transactions for the companies involved. These transactions play a central role in the global economy. IFRS 3 Business Combinations sets out the accounting requirements for these transactions. A few years after issuing IFRS 3, the International Accounting Standards Board (IASB) asked stakeholders whether the Standard was working as intended. Such an assessment is called a Post‑implementation Review. Stakeholders raised concerns about some aspects of the accounting for acquisitions. The IASB has been exploring these concerns in a research project called ‘Goodwill and Impairment’.


In this context, the IASB has issued a Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment on possible improvements to the information companies report about acquisitions of businesses to help investors assess how successful those acquisitions have been. The IASB is also seeking feedback on how companies should account for goodwill arising from such transactions. The Discussion Paper sets out the IASB’s following preliminary views to the concerns raised by stakeholders:


  • Improving disclosures about acquisitions – Acquiring another business is a common way for companies to grow. However, acquisitions do not always perform in subsequent years as well as management initially expected. Investors would like to know more about how an acquisition is performing in relation to such expectations, not least so that they can hold a company’s management to account for its acquisition decisions.

In response to this feedback, the IASB is suggesting changes to IFRS Standards that would require a company to disclose information about its objectives for an acquisition and, in subsequent periods, information about how that acquisition is performing against those objectives.

  • Improving the accounting for goodwill -. Companies must test goodwill for impairment annually, but stakeholders have mixed views about whether this test is effective. Some argue that the impairment test informs investors about an acquisition’s performance. Others say that the test is costly and complex, and that impairment losses on goodwill are often reported too late. The IASB has tried to identify a better impairment test—one that would require a company to report at an earlier date if its goodwill had lost value. The current test provides information to investors, but it tests a broader set of assets than just goodwill. The IASB has concluded that there is no alternative that can target goodwill better and at reasonable cost. It expects that the new disclosure requirements would provide investors with the information needed on the performance of an acquisition.

Some stakeholders have suggested that the IASB should reintroduce amortisation—the gradual write-down of goodwill over time, which was the requirement in IFRS Standards until 2004. But, having considered the pros and cons of amortisation, the IASB’s preliminary conclusion is that it should retain the impairment-only approach, because there is no clear evidence that amortising goodwill would significantly improve the information that companies report to investors.

  • Other topics – The Discussion Paper contains further proposals in addition to those outlined above, including proposals to reduce the cost of the impairment test for preparers. 

The Accounting Standards Board (ASB) of ICAI with the aim to provide an opportunity to the various stakeholders in India to raise their concerns at the initial International Standard-setting stage itself, invites comments on the Discussion Paper issued by the IASB. The ASB also proposes to organise webcasts on the said Discussion Paper (further details to be announced in due course). We would be looking forward for your close involvement and active participation in responding to the IASB.


The above mentioned Discussion paper is hosted on the website of the Institute of Chartered Accountants of India for public comments with last date as June 30, 2020 that may be accessed at the following link:

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