The IMA Financial Reporting Committee (FRC or Committee) issued a comment letter in response to IASB Discussion Paper DP/2020/1, Business Combinations—Disclosures, Goodwill and Impairment (Discussion Paper). The IASB issued the Discussion Paper to obtain feedback and assess how to improve the information that companies must provide regarding post-acquisition performance. The Discussion Paper notes that improved information may facilitate investors’ ability to hold a company’s management to account for acquisition decisions. The Discussion Paper addresses the following areas:

  • Disclosing information about acquisitions
  • Testing goodwill for impairment—effectiveness and cost
  • Reintroducing goodwill amortization, and
  • Recognizing intangible assets separately from goodwill.

In its comment letter, the Committee states that it appreciates the IASB’s ongoing efforts to address financial accounting and reporting around intangible assets. The FRC notes further that the topic is subject to a diversity of views and ongoing debate in the financial community, and this diversity is reflected in the Committee’s views. Although the FRC uniformly opposes an Amortization Only model, there is no clear consensus on an Impairment Only model versus an Amortization + Impairment model. In its letter, the FRC also addresses specific points:   

  • Disclosures regarding the subsequent performance of an acquisition 
  • Current proforma disclosures
  • Impairment assessment processes, including auditor documentation 
  • Balance sheet presentation of goodwill
  • Intangible assets recognized on the balance sheet  

The FRC’s discussion references points raised in its October 7, 2019 response to the FASB’s Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill