• Accounting Alert September 2020

Goodwill and Impairment

The International Accounting Standards Board (IASB) has recently issued for comment DP/2020/1 Business Combinations—Disclosures, Goodwill and Impairment (the DP).

The IASB’s aim is to improve the information entities provide to investors, at a reasonable cost, about the acquisitions those companies make and associated goodwill.

The New Zealand Accounting Standards Board (NZASB) is seeking your feedback on this DP, as the accounting for goodwill is a topic that has been subject to continued debate for many years, especially since amortisation of goodwill was removed and replaced by a mandatory annual impairment test.

The DP sets out the IASB’s preliminary views that the IASB should:

  1. improve disclosures about acquisitions – this could include introducing disclosure requirements for information about management’s objectives for acquisitions and how acquisitions have performed against those objectives;
  2. retain the impairment-only model for goodwill, rather than reintroducing amortisation of goodwill;
  3. provide relief from the mandatory annual impairment test of goodwill;
  4. amend how value in use is estimated, to simplify the impairment test;
  5. require the presentation of total equity excluding goodwill on the balance sheet, and;
  6. retain the current requirements on the recognition of acquired intangible assets separately from goodwill.

The IASB also considered whether the impairment test could be made significantly more effective, at a reasonable cost to entities. The IASB’s preliminary view is that this is not feasible.

The IASB is seeking comments on whether:

  1. its suggested disclosure requirements for acquisitions would provide useful information and are feasible; and
  2. stakeholders have new evidence or new arguments on how companies should account for goodwill.


The NZASB want to hear your views on these matters, as the IASB’s deliberations could lead to major changes to how for-profit entities in New Zealand are required to account for goodwill and the required disclosures of business acquisitions.

Comments on the Discussion Paper are due to the NZASB on 2 November 2020 and to the IASB by 31 December 2020.


For more on the above, please contact your local BDO representative.