IASB urges investment professionals to share their views on goodwill and impairment


Zach Gast


Zach Gast, Board Member of the International Accounting Standards Board (Board), urges investment professionals to share their views.

Having reviewed its Standard on mergers and acquisitions, IFRS 3 Business Combinations, the Board recently published the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment to address the feedback from that review.

One of the main concerns investors raise is that they often don’t get information about how well acquisitions perform. Investors say that such information is needed to help them assess management’s performance in making and executing acquisition decisions. The Board’s Discussion Paper aims to explore how to address this feedback.

Perhaps the key change being considered by the Board is a set of new disclosure requirements. These disclosures would require a company to disclose management’s strategic rationale for the acquisition and more detailed objectives and targets for it. Subsequently, the company would be required to disclose information about whether the acquisition was successful in meeting those objectives and targets.

The Board is looking for feedback from investors on whether this information would meet their needs and hence investor views on these disclosure proposals are important.

A couple of other areas may be of interest to investors, and the Board welcomes feedback on them. These include:

  • Whether to reintroduce amortisation of goodwill, the gradual write-down of goodwill over time—which was the requirement in IFRS Standards until 2004. The Board’s initial view is that it should retain the existing approach, which requires only an impairment test of businesses containing goodwill. The Board is seeking feedback on whether the reintroduction of amortisation would significantly improve the information provided to investors. Because this topic has been hotly debated already, the Board is looking only for feedback that provides new insight on the issue.
  • Whether there are some intangible assets (for example customer lists) that should be recognised separately on a company’s balance sheet, or included within goodwill. The Board is seeking feedback as to whether including those assets on a company’s balance sheet, as opposed to including them within goodwill, provides investors with useful information and, if not, which ones should not be recognised separately.

The Board is asking for comments by 31 December 2020 and will consider all feedback in developing its final requirements. I would urge the investment community to share their views with us on these proposals to ensure their voice is heard in improving financial reporting standards for this important area of business activity. You can find further information about the Board’s proposals in the Discussion Paper.

Zach Gast, from Maryland, USA, has more than 20 years of investment experience. He joins the Board for an initial term of five years from the Center for Financial Research and Analysis (CFRA)—a provider of independent investment research—where he served as president, directing the organisation’s forensic accounting and equity research strategy.

Before joining the CFRA, he served as a senior vice-president at Paulson & Co investment managers from 2009 to 2013 and as the sector lead for financial sector equity analysis at the CFRA from 2005 to 2009.

Zach has also served as a member of the Financial Accounting Standards Board’s (FASB) Financial Accounting Standards Advisory Council since 2018. He has an MBA from Georgetown University.

Disclaimer: The views expressed in the blog are those of the author and do not necessarily represent the views of CRUF participants.

The views expressed in this article are those of the author as an individual and do not necessarily reflect the views of the International Accounting Standards Board (Board) or the IFRS Foundation (Foundation). The Board and the Foundation encourage members and staff to express their individual views. This article has not undergone the Foundation’s due process. The Board takes official positions only after extensive review, in accordance with the Foundation’s due process.


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