The ASBJ submits papers on Goodwill and Impairment for discussions at the July 2017 ASAF meeting

12 June 2017

The ASBJ submitted the following two papers on Goodwill and Impairment for discussions at the Accounting Standards Advisory Forum(ASAF) meeting scheduled in July 2017:

1. Research Paper No. 3, “Analyst Views on Financial Information Regarding Goodwill”
2. Agenda Paper “Possible Approach for Addressing the ‘Too Little, Too Late’ Issue”

Today the ASBJ published Research Paper No. 3, “Analyst Views on Financial Information Regarding Goodwill”.  This Research Paper reports the results of interviews conducted with Japanese analysts with the aim of understanding their current views on goodwill and impairment more thoroughly.  The ASBJ intends to discuss the results of the research with ASAF members. Research Paper No. 3 can be accessed [here].

As for the Agenda Paper “Possible Approach for Addressing the ‘Too Little, Too Late’ Issue”, the ASBJ intends to discuss the following views and proposals of the ASBJ with ASAF members:

1. The ASBJ has been consistently supporting the amortisation and impairment model because it provides useful information to users of financial statements regarding the entity’s financial performance after the business combination by reflecting the deterioration in the value of goodwill in profit or loss for each period through amortisation.
2. In this Agenda Paper, the ASBJ proposes considering an optional approach, which an entity would be required to choose either the impairment-only model under current IAS 36 or the amortisation and impairment model based on what the entity thinks is useful to discharge its accountability responsibilities as an accounting policy, considering the current situation regarding the appropriate subsequent accounting for goodwill.
   The ASBJ thinks that the optional approach has the advantages of providing management with options to choose the accounting model it thinks is useful to discharge its accountability responsibilities and of providing preparers and investors with opportunity to communicate more effectively.
3. If the amortisation of goodwill were to be reintroduced, the ASBJ thinks that it is important to clarify the principle regarding how to determine the amortisation period.  In this agenda paper, the ASBJ proposes amortising goodwill based on management’s estimate of the period for which the future net cash inflows would increase due to the business combination, from the perspective of providing relevant information to users of financial statements.

 

Agenda Paper “Possible Approach for Addressing the ‘Too Little, Too Late’ Issue”

 

The ASBJ hopes that the two papers facilitate the international discussions related to the accounting for goodwill.