Goodwill and Impairment

The post-implementation review (PIR) of IFRS 3, Business Combinations, heard feedback in relation to the requirements of IAS 36, Impairment of Assets, stating that the requirements for the annual impairment test of impairment for goodwill are unduly onerous, time-consuming and costly to perform. Some advocated abolishing the impairment testing and reverting to amortisation of goodwill. However, the Board has decided not to go down this route. While companies find the annual impairment testing burdensome, investors and others complain that impairment write-downs on goodwill can be characterised by the G20’s pithy phrase “too little, too late”. Other commentators share this view – see, for example, an EFRAG Discussion Paper[1] from 2017: Goodwill Impairment Test: Can It Be Improved? The Board is seeking ways of tackling this issue.